Attitude changed over the time
Trading is the exchange of services or goods between two parties. So if you need petrol for your car, then you would trade (exchange) dollars for petrol. Many years ago, trading was done by barter, where one product was exchanged for another. At that time the trading was not risky but today, due to the development in the World Wide Web, risk in the trading has become completely out of control because the speed at which the transactions take place is very fast. In Forex trading, the speed of the transaction and the desire of making a profit in few seconds can often trigger an impulse of gambling in the traders. Hence most of the traders might turn to currency trading as a form of gambling instead of considering it as a professional business.
What is gambling in Forex Trading?
Speculating in Forex trading is not gambling. The main difference between speculating and gambling is risk management. In short, with speculating, you have control over your risk but with gambling you do not have any kind of control over your risk. You can also play even a card game either with the mindset of a gambler or with that of a speculator. You can make money in the currency trading only by trading with the mindset of a speculator.
There are three ways for taking a bet which are martingale, anti-martingale or speculative. Speculation has been derived from a Latin word and its meaning is to look forward. Martingale is a method of gambling in which an individual doubles the stakes after each loss. In this online trading strategy, you double your bet each time after losing a trade in the hope that the losing trade will end and finally you will make a favorable trade and will recover all your losses and even you may get a small profit.
Best Known Method:
In an anti-martingale Forex trading strategy, you double your bet each time after winning a trade but you halve your bet each time after losing a trade. This theory indicates that you take the advantage of winning trades to get the profit accordingly. Undoubtedly, for the online Forex traders, this strategy is better for making money. Increasing your trade size when you are winning and take your losses quickly is a good method of managing your risk.
First of all calculate the chances of your trade to become unsuccessful. This is the first and the most important rule of the risk management. For this, you should understand both technical as well as fundamental analysis. You also need to know the fundamentals of the foreign exchange market like psychological price trigger points, which you may know with the help of a price chart. After taking a decision for a trade, the next important thing is to manage or control the risk.
Remember you can manage the risk only if you are able to measure it.
If the chances of winning trade are in your favor, draw a line which will be your exit point if the currency exchange market reaches that level. The difference between your entry point and this cut-out point is your risk which you must accept even before you enter a trade. If you are OK with this loss then you can think for the next trade. However if the loss in Forex trading is too much and you cannot bear it, then do not take another trade because you will be severely stressed and cannot manage your trade as it proceeds further.
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