Let’s take a look at a more specific example of blackjack odds to better understand it in real life.
One of the most important characteristics of blackjack, as well as any other casino game, is that no matter how professional a player is, the house will always win in the long run. Granted, some people will win big prizes, however, the total losses will eventually equalize those winnings and turn the balance wheel towards the casino.
This is possible by what is called a “house edge” and that is where the differences between Forex and gambling arise. In blackjack, a player has to always act first when the first round of dealing is over. And when they hit a card (demand another card from the dealer) and bust, i.e. the card values go over 21, they lose, even if the house busts as well. It is interesting that a chance of this to happen is about 28%.
Another interesting detail is that every hand value has a specific probability of busting a player. For example, if a player has a hand value of 11 or lower after a starting hand, there is a 0% probability that they will bust. Immediately above the value of 11, this probability increases massively: 12 hand value - 31% chance of busting, 13 hand value - 39% chance of busting… By the value of 20, the probability of busting is 92% and at 21, a player will definitely bust by hitting an extra card.
Now, players can use different techniques like doubling down to increase the payouts, splitting the pair, etc. to reduce the odds that are in favor of the house. But even by doing that, the house will still be in a better position.
Trading Forex isn’t gambling - Here’s why
Unlike gambling, there is no “house” in Forex trading. Your competitor on the market is another trader who has his/her own interests. In short, trading Forex is more like a zero-sum game where some people win and some people lose. But more importantly, the real adversary in this sense is yourself: you have to think before you make a decision and don’t let greed get the better of you
So, what differentiates Forex and gambling is that traders aren’t passive participants of the process where they’re intentionally put in a worse position by the market. By using various strategies and tools, a trader has the ability to dial the odds to their advantage and be ahead of the market, as well as other traders.
How can a trader turn the odds in their favor?
There are different approaches and techniques in trading that enable people to make more conscious and well-thought-out decisions. Let’s have a look at some of the most popular ones:
- One of the most widely-used approaches is to incorporate technical analysis into trading. With this method, traders can further outline Forex and gambling differences by minimizing the randomness of a trade. Technical analysis allows people to observe prior price movements, analyze them, and speculate in which direction the market will move. And there are lots of technical indicators that make this possible;
- A trader can also conduct a fundamental analysis with the help of different economic indicators. By using this method, he/she can observe the current state of a company, market, or a country, assess their strength, and determine, whether the price of an asset will increase, decrease, or stay the same;
- There are also various risk management strategies that reduce the chances of losing too much and make the portfolio more stable. For example, a trader can diversify their portfolio by using different trading instruments.
Obviously, these aren’t the only strategies that help traders dial the odds in their favor. Besides, even they won’t be able to offer the exact point where the price will go next - they are useful as much as they make speculation a bit more accurate. But more importantly, they enable traders to trade more consciously on Forex unlike gambling.