Forex Trading can be (games) gambling rather than investment

January 28th, 2010 admin Posted in education |

By Peter McNamara

Everybody is totally different and has a different take on things. Something you find endlessly exciting or stimulating, as well as the joy prospect of earning extra money, may be quite boring to somebody else whose interest you’re attempting to raise, no matter what your intentions or motives. These may embody encouragement - even promotion - to others or bolstering and maybe justifying your own enthusiasm for a particular activity or pastime.

Common pursuits nowadays clearly embrace ‘online’ activities. Every day around the planet, more and a lot of folks get connected to the Internet. Computers have become part of everyday life, in homes, offices and schools even in semi-developed countries. Reliable Web connection availability to the whole population might still be a long off in a number of them, but the goal is there. The net provides knowledge, education, entertainment, national and international communication and most importantly, global business opportunities for nearly anyone, anywhere.

Online Forex trading is a typical example. Previously available only to professional market traders and banks, forex trading is currently very popular with people, and is available to anyone who can open a trading account with a broker or bank, typically with a credit card with amounts starting from twenty-five dollars to a few or even hundreds of thousands.

For the uninformed, forex trading involves investing a relatively tiny quantity of cash for a short amount of time and hoping for movement of the exchange rate between a pair of currencies like the US dollar vs. the British pound. Opt for the proper direction of the movement and you may create cash; opt for the wrong one and you may lose some. It’s all done seamlessly through a virtually world wide electronic exchange similar in ways in which to a conventional stock exchange but without the ‘bricks and mortar’ of a building. Forex dealers or brokers are located in many different countries, a number of them known for their ‘offshore’ banking and tax benefits.

Forex trading is definitely a kind of ‘investment’. This is a business term and seen generally in a positive light inferring the growth of capital. Forex traders have that as their goal, but there are various factors involved in truly achieving that growth. Because there are such a lot of ‘forex losers’, forex trading often gets ‘bad press’. It’s derided by some as ‘gambling’ which has an inherently bad connotation and is even officially banned in some countries.

However, nearly all types of ‘investment’ involve risk and wager, whether or not it’s trading stocks, futures and options - or buying real estate. The worldwide Forex market is a huge business, though, with the almost unbelievable turnover per day of nearly $4,000,000,000,000! Most of that is traded by large financial institutions together with government and commercial banks and managed funds. However, there are millions of smaller, private investors too.

Astute investors (even gamblers) are terribly aware of risk and attempt to manage it by staying within self-imposed limits. There are some similarities between forex spot trading and a casino game like roulette. They are both stimulating and exciting as they happen in the ‘here and now’ with instant results. Each are affected to a point by ‘the house’; for forex it is the dealer, bank or broker. Luck will play a part, as with many things in life, however knowledge of the ‘game’ and skills at ‘playing’ it are the deciding factors when it comes to winning or losing. There are various things that can influence the typically fast movement up or down of stocks, shares, commodity prices and foreign exchange rates. Prices could trend in one direction for minutes, hours, weeks or years, with fluctations of varying duration. Forex traders depend upon those fluctuations more than the long term trend.

Gamblers, traders and investors are happy when their capital grows over time. If they need it to grow faster and more consistently, most attempt to learn more about trading in order to stop making mistakes and profit more. Again, the astute ones also are ready to set cash aside for his or her education. That becomes part of the overall investment.

If, on the other hand, somebody starts trading the forex markets (it’s terribly easy to do) because he or she has been led to believe that forex trading is an straightforward way to make cash, they will be disappointed with their results. After they begin losing money more often than they’re making it, they become disenchanted. Some will be forced to quit; others will try again; some will begin believing that the whole thing could be a scam.

Several will give up because they do not want to make the effort to learn a way to trade properly. Some will write off their losses and attempt to search out another quick way to riches. Unfortunately, they’re likely to fail once more and for exactly the same reason: lack of ability and/or lack of the needed effort.

Without education and knowledge, forex trading is an extraordinarily risky pursuit. With even basic training, the odds improve dramatically and reckless gambling can evolve into ‘investment’. There are many ways in which to get a good forex education. There’s no need to spend a fortune of cash to develop a safe, potentially profitable trading technique.

A course ideal for forex newcomers is Forex Nitty Gritty from Bill Poulos available at http://www.Forex-NittyGritty.com. You’ll learn the basics of good trading for as little as $100. It’s very easy to lose a lot more than that - very quickly - if you do not know what you are doing. Take a look at Forex Nitty Gritty.

Peter McNamara is a British expat, semi-retired in Singapore and enthusiastic about market trading as a ’small investor’. His own early experience with forex trading resulted in loss. He eventually ’saw the light’. Visit his site at Forex-Loser.com.

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