What Gambling Can Teach You About Trading

It is said that trading in the forex market is like gambling except in a larger scale. In a way, they are actually quite the same. Most people see gambling as playing a game that is solely based on luck and luck alone. This is one of the biggest misconceptions about gambling. Gambling involves a lot of critical thinking and strategy in order to win. You can’t just go to a poker table and see what happens. You have to prepare and whip up your “gambling” skills. The same goes for trading in the forex market. Gambling can actually teach you a lot about trading forex.

The Mindset

First of all, gambling teaches you how to remain calm. When you start panicking, you might make a bad decision because you’re not in the proper mind frame. You might decide to invest all your money in one basket, so that you can recover from a loss.   The same thing goes for trading as well. When you suffer a big loss, relax and don’t panic. There still is a way to recover that loss if you know how to go about it.

The Strategy

What most people don’t know is that gambling actually requires strategy. As I said earlier, gambling isn’t just about going into the game and seeing what happens. You must have a plan before you start. According to the Art of War, if you don’t plan, you will lose. You have to learn the different types of trading strategies before you start trading. Even if you use an online forex trading platform like CMC Markets which often uses spread betting to analyze outcomes, you still have to study because you can’t completely rely on a computerized system (nothing can beat human instinct).

The Decision

In any game, you have to know when to push and when to retreat. Let’s take poker as an example. You have to know when to hold and when to fold. The same thing applies to trading in the forex market. You have to know when to hold your pair or sell it off. Holding on to it gives you the opportunity to make more money, but also exposes you to a loss. Selling it off once you make your profit allows you to have whatever money you’ve previously made already. The decision will be up to your own judgment.

The Risk Management

When gambling, there is always a risk of losing money. However, it is your job to manage the chances. I’ll give you a tip on risk management: don’t put all your money in one basket. Spread out your money a little bit, and play different games. This way, you won’t lose everything in one shot. I’d say the same thing goes for forex trading. Don’t just stick to one pair; study others and invest in them too if you find that they are profitable. If you lose with one pair, you can always gain it back with another. Always make sure you lessen your chances of losing.