Since its rise in the 1970s, the Forex market has witnessed exponential growth, evolving into the largest financial market globally. According to data from the Bank of International Settlements, the average daily trading volume soared from 1.2 trillion in 1995 to a staggering 5.1 trillion in 2016.
Amidst the pandemic, the allure of online trading has captivated a growing number of individuals, sparking a question that has persisted throughout my career: Is trading online merely a form of gambling?
Initially, my inclination was to believe that it was not gambling, but rather a means of speculating in the market based on informed decisions. It seemed like a great sales pitch. However, my perspective shifted when I transitioned into the role of a broker and account manager.
I observed that the majority of new retail traders, driven by the desire for quick and easy profits, tended to trade impulsively and without a clear strategy. It was reminiscent of gambling.
To shed light on the matter, let's examine the definition of gambling. According to the Cambridge and Oxford online dictionaries, gambling involves betting money on games of chance or horse races. Traits such as addictive behaviour and accumulating debts are often associated with gambling.
When we consider these aspects, it becomes evident that online trading shares certain characteristics with gambling.
Let's delve deeper into some of the reasons why people engage in trading, sometimes even labelling it as a scam.
Peer Pressure: Social or peer pressure can influence individuals to take action in the realm of investments, even if they have no genuine interest or understanding of the financial markets. For instance, a friend at a pub claims to have made a fortune on a specific stock, urging others to buy it without conducting any thorough research.
In such cases, trading without informed decision-making becomes akin to gambling.
Debt Repayment: Many individuals, especially during economic downturns, turn to trading as a means of escaping financial struggles.
The internet is teeming with opportunities promising quick and easy money, attracting those who are desperate for a way out. If someone jumps into the first seemingly effortless opportunity without proper research, it falls into the realm of gambling.
Habit Formation: A new trader who has completed some due diligence, opened an account, and grasped the basics of trading may continue to trade relentlessly without setting clear goals or exit strategies. This repetitive and impulsive behaviour is characteristic of gambling.
Thrill and Excitement: The fast-paced nature of markets, coupled with the constant emergence of opportunities, generates an adrenaline rush for traders.
The allure of the thrill and passion associated with trading can drive individuals to continuously chase after that feeling. This psychological pattern aligns with gambling tendencies.
While there are numerous examples, it's important to note that not everyone falls into these patterns. Let's explore the upside.
Beginners must grasp the basics, acknowledge the risks, and be willing to learn. It doesn't require a PhD in Economics, but rather the individual's commitment and effort.
Traders need access to resources and support to achieve their goals, but they must also determine which approach best suits them.
In conclusion, the successful traders I have encountered have likely experienced some of the aforementioned examples. However, they trade not solely for the money, but because they understand the system.
They adapt strategies and vigilantly monitor market fluctuations. It's important to remember that all traders, regardless of experience, encounter losses at times. When a trader possesses a well-defined strategy, speculates in the market based on informed decisions, and maintains discipline, it ceases to be gambling.
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