Forex trading is fast becoming a popular investment option for individuals who are looking for more returns for their money. And with the popularity it gains, many investors plunge into it without the proper education and training that is required to delve into the volatile world of forex. As a result, there are many forex investors who lose their investments in a short period of time.
Statistically, over 90% of first-time forex investors lose their capital within the first three months of making their first trade. It is not surprising actually, given that most of them are really ill-prepared to handle the intricacies of this financial investment.
So many people are now questioning the validity of forex as an investment. And some are now asking if forex trading may actually be gambling.
So, is forex trading actually gambling?
First of all, forex trading is an investment. But let us clarify that statement more definitively. Forex trading is a form of speculative investment. And as a definition, speculative investments are investments with a high degree of risk. Simply put, a person invests in something which he or she speculates shall rise in value in the future. And when that times that the value of his investment rises, then he or she shall sell it for a profit. That is how speculative investments make you money.
A business that a person builds is an investment in many levels. It is an investment of his money, obviously, as he puts up capital to buy the assets and resources necessary to operate the business. A business is also an investment of one’s time as the investor needs to devote some amount of time to be able to monitor the transactions and financial status of a business. And a business is also an investment of skills. Depending on what type of business you are in, and what type of expertise you are leveraging on to be able to build that business, the skills required to operate that business and make that business profit is essential.
Having said that, a business, with all the investments brought into it, still is not a guaranteed success by anay stretch of one’s wishes. There is always some degree of risk involved when putting up a business. Although the risks are not as high as that of a speculative investment, the risks actually do exist.
Risks for speculative investments and investments in businesses can be quantified. As to which level does an investment risk become speculative is an open financial debate.
But the other end of the equation should be put into perspective when discussing risks. And that is reward. Reward is simply the profit that an investor gains from the risks that he takes when he made the investment. It is a general rule that the higher the risk is, the higher the reward shall be. And this holds true for most investments. If you want to gain exceptional returns on your investment, be ready to take significant amounts of risk
Gambling, on the other side of the spectrum, is making a bet on chances. There are no other variables like when putting up a business where the skills of the workers, or the management capabilities of the administrators, or the financial capability of the stakeholders would come into play. Gambling is purely a game of chances.
Viewing forex trading as gambling is not exactly accurate since investing in currencies is not purely a game of chances. There are factors involved as to why and when a currency appreciates or depreciates in value. Factors like interest rates, financial stability, political atmosphere, and trade balances are all important indicators that affect currencies of all nations. And these indicators are all verifiable by forex investors. These can form the basis for the sound fundamental decisions that forex investors make. As for the timing of the currency positions, that is where technical analysis comes in. But that would be a matter for another in-depth discussion.
So if you want a pure game of chances to take your shot at getting rich quickly, go to the casinos and gamble. But if you prefer a speculative form of investment with lucrative profit potentials, try forex trading. But you should always remember that no matter how enticing the profitability of investing in forex is, there is still work to be done. It is not simply a matter of throwing a coin to be able to choose whether to buy or sell a currency pair. Fundamental knowledge and technical analysis are keys to succeed in forex trading.
The author is a full-time forex trader for 8 years now. Using a variety of manual trading strategies and automated trading systems, he has learned how to invest in forex for a living. The author maintains a few websites all related to forex trading. Visit them at http://www.forex-autopilot-system.info and http://managed-forex-trading.info.
Article Source: http://EzineArticles.com/expert/Dave_Redfield/558886