There are thousands of articles and media reports that equate any type of investing to gambling. When you focus on investing on the Forex or commodities markets there is even more of the inherent prejudice of the mass media to discredit it as an investment and call it gambling. While this is not an accurate depiction of the markets, it may accurately describe many of the people involved in the market. The Forex and Commodities Exchanges are legitimate venues for investors with risk capital. Many of the people that trade in these markets are gamblers rather than investors.
The impression that currency speculation is actually gambling comes from a lack of understanding about the process. The people choosing to call it gambling have some pretty strong facts on their side however. More individuals lose money in the Forex market than make profits and no system is foolproof. These are simple facts but they cloud the real picture. It is the same amount of money be being lost or gained. Every loss or gain results in the opposite loss or gain on the other side of the equation. This does not mean (as some suggest) that it is impossible to profit over the long term based on the structure of the market. The fact that the majority of the profits are made by an overall minority of the investors, it is clear that there is in fact a skill and strategy involved that can be learned and developed.
Investing is a Business – Treat it Like One
This is nowhere more important than the Forex. If you base your decisions on a planned and established strategy making a handsome profit it is more than possible over the long term. This requires either a solid understanding of technical and fundamental indicators, or a strict disciplined approach in a price point strategy. The most successful investors while adhering to one method have enough understanding of other methods to become aware when they should not invest at all based on market conditions.
The key difference in the mentality of investing as a business compared to the gambling mentality of many individual investors is in what the focus is on.
The investor mindset is focused on the ratio of risk to profit potential and conservation of capital. Professional investors are not bothered greatly by losses because the amount of the potential loss is already calculated in advance and deemed an acceptable risk. If every position is 2% of capital risked, than no single loss or even a series of losses will have a dramatic enough effect to cause an emotional turn. By the same token even a large profit is simply a new number to consider, maintaining correct sizing so there is no more or less risk in the next position.
This basic structured process takes the wild balance fluctuations and emotional highs and lows out of Forex trading, and to be honest may make it seem boring. It is business and work, not entertainment so this is not a negative. While potential profits of 2% and 3% seem very boring and timid consider this. Many people lose money every day trying to make 20% returns, but if you manage 2% or 3% a month than you will be earning 24%- 36% a year on your portfolio and that is exciting to anybody.