Despite their inherent differences, people draw parallels between trading and gambling. In this article, we’ll discuss those factors that sometimes confuse the two activities. As well as those that make them distinct.
1. Research, analysis and planning
While trading is not gambling, one could consider a trader taking a gamble. If executing trades in a purely speculative way, lacking any planning, analysis, learning, or research. This is not to say that trading forex for instance isn’t speculative, it is. But the speculation is based on engaging in analysis. Monitoring economic and geopolitical events, ongoing learning, and so much more. Trading only resembles gambling when an investor relies solely on chance or gut feel, without considering any other factors.
2. Risk Management Techniques
Another way that trading is distinct from gambling is the level of risk management strategies adopted by traders. To minimize loss and safeguard their money. Popular risk management techniques like stopping loss or taking profit orders are not typically used in gambling. Thereby leaving one’s chance of making gains entirely to chance. Removing these measures from trading, and the potential for incurring significant losses increases exponentially, drawing parallels with gambling risk.
3. Trading-related education and learning
Cautious traders will engage in some form of trading-related education to keep informed and refine their skills. And regardless of how experienced an investor is, ongoing learning is key. Markets change, trends change, and technologies advance. Not keeping up means falling behind, resulting in less-than-stellar investing outcomes. Gambling doesn’t impose this type of requirement. It’s typically a game of chance, not skill – depending on what’s being gambled on, of course.
But how do traders acquire the information they need to enhance their investing-related expertise and knowledge? There are many ways. Some of the most popular include e-books or guides, physical books, podcasts, webinars, seminars, videos, and much more. Many of these resources are available online and are often free to access. In addition, reputable brokers like T4Trade offer learning material to help their traders. Become more proficient in forex investing and improve potential outcomes.
In fact, in addition to many of these educational tools, the T4Trade Academy. It also provides Live TV for daily (Monday to Friday) commentary and an innovative real-time Economic Calendar. Track key economic releases, announcements, and other critical events that may impact markets and consequently trade. T4Trade blogs also pack useful insights on trading fundamentals and cover sought-after topics for someone looking to become better informed.
4. Short-term transactions vs long-term profitability
A further distinction between gambling and trading is transaction time. A gambler usually seeks to make quick gains using short-term, high-risk strategies. On the other hand, traders engage in different styles of investing, based on budget and risk tolerance. Depending on style, an investor may hold onto positions for a few seconds to a few years, depending on financial goals.
5. The impact of emotions driving financial transactions
A significant commonality between gambling and trading lies in the strong feelings that they elicit. This is largely due to the stress and anxiety that both activities evoke. In the world of investing though, the focus on handling one’s psychology to achieve more successful financial outcomes has increased exponentially. So much so in fact that research into trading psychology and the influence it has on decision-making processes has picked up pace. Being mindful of your emotions and the degree to which they drive trade execution is vital to mitigate adverse consequences. The key is to maintain objective, rational behaviors.
6. Becoming a skilled trader through practice
Unlike a gambler, a trader has the opportunity to refine their skills by using a demo account. A demo account allows an investor to practice trading in a virtual investing environment that simulates real-life market conditions. In this virtual space, an investor can execute trades using virtual currency, thereby safeguarding their capital as they build up experience. The forex investor has unlimited time to implement a variety of trading strategies, identify the strengths and weaknesses of each, and then make tweaks if necessary.
A beginner trader can also utilize a demo account to learn more about technical and fundamental analysis, which they can then incorporate into future investments. A seasoned investor can use a demo account to test complex investing strategies before attempting to implement them in a live investing environment. Additionally, a demo account also allows an investor to become more familiar with navigating (finding their way around) the specific trading platform. One of the most popular platforms in the world is MetaTrader 4 (MT4).
Why is the MT4 platform so popular?
The MetaTrader 4 platform is one of the world’s most sought-after systems for investing forex, analyzing markets, and using Expert Advisors (also known as robots for automated trading). Millions of traders across the globe use MT4 due to the level of flexibility it offers, its advanced technical analysis, algorithmic trading, and mobile applications.
Its technical analysis capabilities are some of the best and are used to detect trends and patterns, forecast price movements, establish entry/exit points, and set stop loss and take profit levels. MetaTrader 4 also offers 30 built-in indicators, 2k+ free custom indicators, and 700 paid indicators, enabling traders to analyze any market, regardless of how complex. Furthermore, traders can enjoy financial news and alert tools via the MT4 platform, enabling them to keep informed of the latest market events to make more informed investing decisions.
Automated trading functionality
One of the strongest and most innovative features of MetaTrader 4 is its automated trading functionality. With it, an investor can develop, test, and apply Expert Advisors and technical indicators. Also known as algorithmic trading, automated trading reduces the human element in trade execution, thereby mitigating the risk of emotive financial decision-making. Further, the speed at which trades are executed, as well as the volume of trades, is exponentially higher than any individual could achieve, thereby increasing trading opportunities.
Mobile Trading with MT4
Finally, another reason MetaTrader 4 is so sought-after is for the level of convenience it offers in that it allows for investing in the financial markets via iOS and Android-powered smartphones and tablets. The functionality of the mobile versions is very similar to that offered on the desktop, ensuring a seamless investing experience. This allows for trading on the go, wherever you are, and internet connectivity permitting.
Although there are clear distinctions between trading and gambling, it’s important to know that trading doesn’t come without risk. But by maintaining focus, using an investing strategy that aligns with your objectives and skills, and adopting risk management tools, the risk of unexpected or substantial loss can be better managed. It’s crucial to approach trading with well-defined goals and a budget that doesn’t put your savings at risk. Furthermore, ensuring you continuously engage in some form of learning will also help you navigate challenges.
Trading with T4Trade
T4Trade is a renowned broker that appeals to traders from across the globe. The broker provides its traders with a flexible trading environment and access to 300+ financial instruments from 6 asset classes, such as shares, indices, forex, futures, metals, and commodities.
T4Trade traders also have a range of trading accounts to choose from, ensuring that they can pick one that aligns with their needs, objectives, skills, and experience. Traders can also enjoy flexible leverage, competitive spreads, and fast trade executions. In addition, they can also withdraw and deposit funds quickly and easily. A dynamic customer support team is also on hand 24/5 to address any trading concerns via email or Live Chat.
Disclaimer: This material is for general informational and educational purposes only and should not be considered investment advice or an investment recommendation. T4Trade is not responsible for any data provided by third parties referenced or hyperlinked in this communication.
