Forex Trading = Gambling

[metal]

Originally Posted by birdjaguar

Metal, it is all about statistical analysis. The casino cannot predict the future, but they make money consistently. Have you read any good material on developing a statistical edge? It is not unique to casinos or forex. Meanwhile, one trade idea may be to buy 1.1980 with a stop below 1.1950 and sell 1.2180 with a stop above 1.2210. This is just simple support and resistance. You don't need to be able to predict the future. You just need to have a statistical edge. Depending on your strategy, your winners need to be 2 to 3 times your losers. (i.e. -.0025, -.0025, -.0025, +.0100) You can stay afloat with just 25% winners. You need more than support and resistance in your analysis. I was just giving you a simple explanation.

Easier to say it after the price action happened. Thats like saying if I put my money on such and such horse after the race.

And yes, I have studied statistical and non-linear analysis. My masters is in non-linear analysis.

[honeyeater]

Mark Douglas is explicit in implying that traders MUST have the same mindset as gamblers when it comes to accepting risk.

A gambler has predetermined risk even before the placement of a bet. Same must be for a trader.

A trader MUST have the same mindset as the house, that is, the house will run on the results of probability on a series of games. Your edge on the setup must deliver over 20 to 30 trades. Otherwise, back to the drawing board.

If you are all shaken out with one trade, then you need to adopt the gambling mindset asap. Accept that you do not need to predict the direction of price movement on the next trade. Just know that your edge will be profitable over 20 trades.

[cornellj]

Forex=Gambling

Maybe for gamblers, but if you trade a small enough percentage of your money even a 500 pip run against you will do no harm, if you hedge the position. The specific move yesterday made me a lot of money, as did Katrina.

In the final analysis one thing is very certain in our market. Uncertainty. Plan for uncertainty, as if each trade will go against you and then develop a strategy to counter that.

If you look around you at the casino who are the players? If I look around me in Forex I see Banks and knowledgable professionals.

Happy trading.

[comenow]

Of course trading is gambling. It is a game of chance. In a lot of instances the probability of winning is worse that the toss of a fair coin. People don't want to admit they are gambling because they find gambling objectionable. This is rather pointless, because you can make money gambling if, over time,you have a way of putting the odds in your favour. Remember people like the turtles, who have been phenomenally successful at trading. What did this guys do. They played on breakouts of a fixed number of days. Sometimes they got stopped out 10 times in a row, and their rate of success was about 40%. The chance on a fair coin toss is better than that, namely 50%. (One wouldn't take the latter bet because a pay off of more than 1:1 isn't on offer). Trading is gambling;the point is whether you are good at it or not. If you are putting money on a game that involves chance, you are gambling (trading does involve a lot of chance). Accept it and find a way of winning at it.

[cornellj]

Forex is not Gambling.

If I place a bet, the full amount bet is at risk on the fall of a coin, spin of a wheel, a turn of a card, the pull of a lever. The reward is generally much higher than in Forex.

If I take a Forex position I can limit my loss. The market moves up and down so what may be a loss initially may turn out to be a winner. I have a ratio of less than 2% of losses on trades. I have been in trades for up to 9 months. With hedging principles I trade without gambling my money.

You test all your trades, you stopped out, and see how many times they became positive later. The ratio is staggering.

Hence, Forex not Gambling.

[graemenash]

Originally Posted by comenow

Of course trading is gambling. It is a game of chance. In a lot of instances the probability of winning is worse that the toss of a fair coin. People don't want to admit they are gambling because they find gambling objectionable. Trading is gambling;the point is whether you are good at it or not. If you are putting money on a game that involves chance, you are gambling (trading does involve a lot of chance). Accept it and find a way of winning at it.

I'd disagree with most of that. Trading is gambling to a certain extent because you can never say with 100% accuracy what the market will do.

However once you define an "edge" which is profitable more often that it result in losses, trading becomes simply a matter of playing the probabilities when they're in your favour - more like "calculated risk-taking" rather than simple coin-toss gambling.

This is a lesson I'm having to teach myself at the moment - over the last month or two I've been developing a system which seems to have a 70-80% strike rate but I'm struggling to make good pips with it simply because I haven't trained myself to be emotionless and take very trade as soon as it appears. If I took every entry the system gave I'd come out ahead but at the moment I'm still second-guessing the signals and cherry-picking the trades which inevitably reduces the potential profit.

So I guess this little essay's as much for myself as anyone else lol

[Nonpiker]

Here are two quotes that sum things up pretty well:

"Games of chance must be distinguished from games in which skill makes a difference. The principles that work in roulette, dice, and slot machines are identical, but they explain only part of what is involved in poker, betting on the horses, and backgammon. With one group of games the outcome is determined by fate; with the other group, choice comes into play. The odds--the probability of winning--are all you need to know for betting in a game of chance, but you need far more information to predict who will win and who will lose when the outcome depends on skill as well as luck. There are cardplayers and racetrack bettors who are genuine professionals, but no one makes a successful profession out of Craps. Many observes consider the stock market itself little more than a gambling casino . . . Cards, coins, dice, and roulette wheels have no memory."
Peter Bernstein in Against the Gods

"Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook . . . There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are: (1) speculating when you think you are investing; (2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and (3) risking more money in speculation than you can afford to lose. . . everyone who buys a so-called "hot" common-stock issue, or makes a purchase in any way similar thereto, is either speculating or gambling. Speculation is always fascinating, and it can be a lot of fun while you are ahead of the game. If you want to try your luck, put aside a portion--the smaller the better--of your capital in a separate fund for this purpose. Never add more money to this account just because the market has gone up and profits are rolling in. (That's the time to think of taking money out of your speculative funds.) Never mingle your speculative and investment operations in the same account, nor in any part of your thinking.
Benjamin Graham in The Intelligent Investor

[comenow]

Originally Posted by cornellj

Forex is not Gambling.

If I place a bet, the full amount bet is at risk on the fall of a coin, spin of a wheel, a turn of a card, the pull of a lever. The reward is generally much higher than in Forex.

If I take a Forex position I can limit my loss. The market moves up and down so what may be a loss initially may turn out to be a winner. I have a ratio of less than 2% of losses on trades. I have been in trades for up to 9 months. With hedging principles I trade without gambling my money.

You test all your trades, you stopped out, and see how many times they became positive later. The ratio is staggering.

Hence, Forex not Gambling.

You can limit your losses on a game of a toss of a fair coin by deciding how much to bet. Your point about stopped out trades that eventually would have been a winner contradicts you first argument in which you say you can limit your losses.