Do You Have a Gambling Problem?
By: Johnathon Fox
Forex trading lends itself to gambling with the high reward and increased leverage available to traders. Likewise, most Forex traders have a similar mindset to gamblers - they are looking to make big money and fast! The idea of getting that next big win is what normally attracts gamblers and Forex traders to do what they do.
Are you gambling in the Forex market?
To determine whether you’re gambling in the Forex market, ask yourself the following questions:
- Do you have an edge over the market?
- Do you ever risk more than 5% of your account?
- Are you trading with money you can’t afford to lose?
- Are you just holding out for that next big trade?
If you answered yes to these questions it is a high probability you are gambling with your money in the Forex market, as compared to the professionals who approach their trading more cautiously, as they would running a business.
Gamblers don’t see what they do as a business. Instead, they approach Forex with a dangerous zealousness. But here is exactly where Forex trading can differ from gambling. Traders can use a proven method such as Price Action trading to give themselves and edge over the market.
Most gamblers act on hope. Hope of the next win and hope that they can claw back the losses they have sustained. When Forex traders act on hope they get into very dangerous waters.
What you can do if you are trading like a gambler
Realizing that you’re trading like a gambler is a painful realization, but one that can be overcome by beginning to treat your trading like you would a career or a business. All business have a sound business plan and your trading should be no different. Your business plan should contain the following elements:
- Understanding of how much you will risk per trade
- Entry and exit rules
- Trade management rules
- Times you will scan the market
Being realistic about what can be achieved in your trading plan is essential. Forex trading can make you money consistently but if you are opening an account with $1,000 you are not going to make $1million and quit your job.
Moreover, every business must keep a record of money made and lost. Your trading should also have such a book or trade journal. Your trade journal should track all things such as trades placed and the outcomes including profit/loss and how you managed the trade.
Start acting like a professional trader
Professional traders do not see the markets as a game or a place to take huge risks. Professional traders know that trading Forex is all about managing risk. Start getting into the right mindset and become a professional at managing your risk. Stop over leveraging your positions and taking risks that could cripple your account. Instead work out your money management techniques and how you can protect your downside whilst not capping the upside potential.