By Jay Meisler
Is there a difference between forex trading and gambling? I have been asked this question on more than one occasion and it is a good one as it can make the difference between failing and having a chance to succeed.
Compare a professional gambler who plays the odds with a casual gambler who hopes to make money if he gets lucky and measure the results. Similarly, there is a difference between a professional trader who relies on a systematic approach, discipline and prudent money management with a trader who relies on luck as much as skill to stay afloat. Of course, there is a gray area in between these two extremes where many retail traders reside
Whatever path you choose to take, you will see a difference if you treat trading as a business and not gambling. I have covered this in a section entitled Treat Trading as a Business and Not a Casino in Jay Meisler’s Trading Tips
If you were running a business you would deduct expenses from sales to see if you are making a profit. You would also calculate profit per sale and measure that against your overhead.
Treat trading as a business and keep a log of your trades. Calculate your average profit per winning trade, average loss per losing trade and percentage winners vs. losers. If this does not produce a profit or a profit not worth the risk you are taking, then reassess your approach and set goals.
With limited capital it is important that your business strategy has a formula that produces a profit or you will eventually run out of money.
I was quoted over ten years ago saying the following and it still holds true today:
"Those who treat forex trading as if they were in a casino will see the same long-term results as when they go to Las Vegas," he says, adding: "If you treat forex trading like a business, including proper money management, you have a better chance of success." …Newsweek International, March 15, 2004
Free beta test How to Treat Your Forex Trading as a Business
Jay Meisler is the founder of the Global Traders Association
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.