Forex & Gambling - Why Currency and Casinos Don't Compare

Is Forex trading the same as gambling? Learn what makes the currency markets different and how you can take a winning approach to trading.

Is Forex Gambling?

To the uninitiated, there may not seem to be much that separates gambling from foreign currency trading. Checking the odds, throwing the dice, and waiting for a big win or devastating loss seem to be the order of the day across both pursuits, but whilst there are passing similarities between them, the truth is that they are markedly distinct.

Many people assume that forex trading is no different from gambling, but the distinctions between the two go to the very root of what they are. Gambling is, by design, an entertainment business that ultimately leaves the provider in pocket as often as 99% of the time.

The odds are stacked against gamblers, and whilst some are better than others, there is little that can be done to truly influence the outcome of your gambling habit in a consistent way. Even the best gamblers lose no matter how much inherent skill, ability or dexterity they possess. In contrast, forex trading is all about wealth generation.

Strategy rules the day and the factors that influence successful trades are far more tangible than the skills of even the very best card counters at the poker table.

In this article, we explore why forex and gambling aren’t comparable, and how you can avoid playing a game of chance with the currency markets.

Business or Pleasure?

“Cause the house always wins. You play long enough, never change the stakes, the house takes you.”
Danny, Oceans 11 (2001)

Gambling is, by its very nature, a leisure activity. Six-sided dice from Ancient Mesopotamia, lottery games in 10th century China and a primitive form of poker in 17th century Persia all point to the development of gambling as a pastime which through the ages has become something more. Whilst all of these games can be played for fun alone, they are frequently the subject of wagers which risk money and other valuable sources of wealth in a game of chance.

The winner takes it all, whilst the loser is left to lick their wounds and wonder where they went wrong. This is fine, except for the fact that in most cases, the loser won’t have made a mistake but instead have become an unfortunate victim of bad luck. If you’re dealt a losing hand in poker, put money down on the first horse to fall or guess the wrong colour on the roulette wheel, the problem is not that you made the wrong decision but rather that your decision and the game itself were based on an entirely random set of odds that you could do scarcely little to influence or even estimate.

The problem, then, is as much with the game as it is with the player.

The gambling industry has been carefully moulded to ensure maximum profits for the likes of bookmakers and casinos – with no clearer example than fixed-odds betting terminals (FOBTs) which in recent times have come under the scrutiny of the UK government. Without exploring the newly introduced restrictions on the use of FOBTs, the reasoning behind these regulations goes to the very heart of the argument that the gambling industry sets up its patrons and punters to fail.

These machines allow gamblers to bet up to £100 every 20 seconds on games with fixed odds that are ultimately stacked in the vendor’s favour.

Described by UK ministers as a “very serious social blight” nowhere is the scale of this problem more apparent than in Rochdale, a town in Greater Manchester UK with a population of just over 200,000. Here in one year alone, it was found that over £72 million had been staked on FOBTs -representing a bet of £340 for every single man woman and child in the area. This issue is typical of tactics used across the gambling industry, and shows that providers are fanning the flames of addiction because the return custom of losing gamblers is what keeps the sector afloat. The bottom line is this – to make money, they need you to lose.

Contrastingly, the forex market does not have winners and losers – just successful trades and poor investments. Whilst the machinery of the gambling industry is set up to generate maximum profits for providers, the currency markets depend on the success of their patrons. Trading platforms don’t make money when trades go wrong and whilst they make a commission on each transaction, they ultimately need their users to continuing generating an income that is sufficient for them to return and keep trading.

When you trade currency, you’re not pitting yourself against another person but rather you are exercising what should be a trading strategy based on empirical evidence and examination of the real-world factors that affect the price of pairs. The odds aren’t fixed and whilst there is an element of ‘luck’ involved, the same is true of any business transaction or investment. This brings the debate back to the nature of forex and the gambling industry. Although the former is intended to be a business practice with scope for wealth generation, the latter is undoubtedly a form of entertainment for which consumers pay a premium and cannot expect consistent returns.

Why forex is not just a guessing game

Ignoring the structural systems and ethical concerns that underpin the gambling industry, perhaps the greatest difference between trading on the currency markets and playing the odds on the casino floor is that in the former you can actually do something proactive to improve your chances of winning. Although it would be misguided to suggest that the currency markets are entirely predictable, it is at least the case that the trajectory of your trades and the success of your portfolio can be influenced by how you react to events within the market.

In forex, even bad situations can be turned around by holding a trade for longer the initially anticipated or selling more quickly to reflect an expected drop in prices. Whilst the matter is out of your hands once you’ve picked a losing horse, the currency markets are not a time-limited game of risk and you can still leverage a portfolio of low-value currency to work in your favour. Success in forex trading is something that takes time, effort and education but these are all firmly within the grasp of even the most novice of fledgeling traders. The price of currency is very much at the mercy of global events and so by developing an understanding of the financial markets you can begin to make educated trades that that are based on tangible factors.

Whereas even the most informed gambler can only base their plays on past results, estimation such as card counting or even bluffing, forex traders can react in real-time to the events that are affecting the markets. Commodity currency pairs such as the US Dollar (USD) and Canadian Dollar (CAD) move with relative consistency along with the price of oil, whilst the Australian Dollar (AUD) and New Zealand Dollar (NZD) frequently go pip for pip with the price of gold and other precious metals. By building up a picture of the real-world events and financial phenomenon, traders can begin to make genuinely informed trades that predict market movement with a greater degree of accuracy than any gambler could replicate.

Beating the system versus building a system

“I want people to understand, gambling is not a bad thing if you do it within the framework of what it's meant to be, which is fun and entertaining.”
Michael Jordan

The words of one of basketball’s greatest players certainly serve to reaffirm the fact that gambling is above all else a source of entertainment, but forex trading sits within a framework of its own. The sentiment of many governments and charities is that gambling is a leisure activity and should be treated accordingly (think of the UK’s “When the fun stops, stop” campaign). In a similar vein, many people consider forex to be a business activity and so it should be treated in the same way as any other form of trading – be it commodities, stocks, bonds or shares. All of these come with their own risks attached, but it is fair to say that anybody taking a serious approach to business will not do so without developing a winning strategy that can generate profits whilst giving serious consideration to sustainability.

Adherence to a strategy is what separates gamblers from traders, and whilst it is possible for somebody to ‘gamble’ on the forex market by placing uninformed trades with no rhyme or reason, doing so is unlikely to yield the best results. Using a forex strategy, traders can analyse the markets and execute trades whilst using risk management techniques to protect themselves from losing their entire portfolio to a bad call.

Whether you study historical trading patterns to identify where the markets will move next (Price Action Trading), make consistent but small daily profits from geopolitical event price fluctuations (Day Trading) or base your transactions on long term frame chart analysis over weeks, months or even years (Position Trading). Developing and sticking to a strategy is one of the most effective ways of ensuring at least a modest level of success whilst trading forex, and could even bring consistent returns from pairings with developing currencies such as the Mexican Pesos (MXN) and the South African Rand (ZAR).

The bottom line

Although any career trader or platform operator would concede that there is an element of risk and chance involved when dealing with forex, when it comes down to it the differences between gambling and trading on the currency markets are clear to see. Even in the most structured scenarios with the most experienced veteran gamblers, it is almost impossible to accurately predict the way that things will turn out and even harder still to build a reasoned plan for how to bounce back from a loss. Conversely, to become successful at forex trading it is absolutely imperative to study the markets, develop a strategy and work in a way that is financially sustainable.

There is no escaping the fact that the gambling industry is built on the losses of its patrons, whilst global forex exchanges continue to thrive and grow from the successes of theirs.

Ready to trade?

To get started with Forex, we highly recommend that you select a broker which is fully licenced and regulated. This is important to ensure your capital is safe and your activity is managed properly and securely. An unlicensed provider could treat you and your money unfairly so make sure you select a provider listed on this website, Forex Choices.

Simply hit the 'Trade Now' button on the provider of your choice to get started trading forex online.

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