By definition, gambling simply means throwing caution to the winds and hoping for the best. It is possible to gamble in the Forex market, and sometimes you may win, but it’s also the easiest way to lose all your money. After all, casinos make money because they know you can’t make money consistently if you gamble. The point is not to gamble at online casinos when trading the FX market, and here are a few tips on how not to:
Know your stuff
So you want to trade the US dollar? Well, do you know the FED’s latest interest rate decision? What does the latest NFP, PMI, CPI and unemployment rates data tell you about the US economy. If you don’t know what all those initials mean, then you are not ready to trade the US dollar.
Go back and learn the basics because otherwise you would be gambling. To avoid trading like you are gambling in some sort of an online casino, you should know all that affects a currency’s strength and find out how that factor stands. Knowledge is therefore crucial before any trade is made – do your research and learn all you can about the Forex market in general and the currencies you want to trade in particular.
Don’t trade like it’s your last order
If you’re gambling, you have the right to throw caution to the wind and risk all your savings – after all, that’s why they call it a gamble. When you do the same in Forex trading, place an order that risks your entire capital and not putting stop-loss, you’re just gambling with your money and acting like it’s the last order you’re going to make. Your Forex broker won’t mind, they will make money from the spread either way, but that’s not how to do it.
To avoid this type of gambling, only put at risk a small portion of your capital; small enough that you can lose it and still keep trading. 2% of your capital, and a maximum of 5%, is best when you want to avoid gambling. That way, you’re trading like someone looking forward to the next trading session rather than a gambler going all in.
Don’t lose your head
Have you ever wondered why there is always alcohol in casinos? I believe it’s to impair your ability to think and reason clearly and logically. When you’re gambling, it doesn’t matter either way because there’s very little thought put into it, but you need to keep your head while trading the Forex market. You can’t make decisions out of impulse or emotion, but your actions need to be carefully thought out. The key here is to never lose sight of the goal and not to deviate from it.
Make statistics your friend instead of luck
Lady luck is a poor partner in the dance that is Forex trading, even though gamblers like her so much. Use statistics instead to judge the probability of different outcomes and leave nothing to chance; only cold math can keep you away from gambling in the Forex markets. Know exactly how much you want to gain and are willing to lose, then stick to it and don’t expect you will get lucky when a trade goes against you.