• Here is Why Forex is Not Gambling A trader is completely different to a gambler. The trader has a large knowledge base of both their trading strategies and also their money management methods. This type of trader is not gambling away their money.
• However, as you develop your strategies and skills, there’s no question that Forex trading can become more science than luck, setting it apart from gambling in an important way. Success for both gamblers and Forex traders relies heavily on self-control. But this similarity doesn’t make gambling entirely akin to Forex trading.

This site is designed to give you the best information when it comes to trading currencies. But although forex trading makes up 60% of my personal income, the other 40% comes from other investing. This includes stocks and shares but also a growing part comes from sports betting, we even have a separate website that talks about this in detail called Ghost Betting Tips.

When I tell people I have £50,000 across a number of sports betting accounts their first reaction is pure shock. Usually followed by the “How can you risk that much money?” The truth? If you keep correct bankroll management, all investing is easy over the long term. Whether that be stocks and shares, forex, sports or anything else. So today I’m going to run through some of my personal opinions on the pros and cons of forex vs sports. I even have a twitter dedicated to only this.

Table of Contents

Forex Trading Pros:

Today’s lesson is going to open your eyes and help you decide if you are trading or gambling, so I want you to read the whole thing very closely, three times over if you have to. Forex Trader or Forex Gambler? - You should read today’s lesson even if you don’t think you have a problem with gambling in the markets, because you will surely pick up some useful advice that will work to.

Back testing a strategy is very easy – Luckily we have a crazy amount of data from the currency markets. They have been around for year and it is very easy to get information about previous prices, structure highs, news and everything in-between. As a result if you come up with a trading strategy. It is very easy to see if you would have made a profit if you traded this in the past. This means you can essentially predict the future (by using the results of the past.)

Limits – There are very few limits to trading forex. You simply have to set up a trading account and then get going. There aren’t any limits to the maximum you can make on a trade. If you are following correct forex trading principles then even if you have 100 million in your trading account you should still only be trading 1 million per trade and hence the currencies won’t fluctuate just due to your investment.

Forex Trading Cons:

Tax – You have to pay tax on all your profits. Like a business this means you have to aquire the funds to start

Starting Capital – Probably the biggest issue to trading forex. As the spreads and pip movements are so small you will need a relatively large bankroll to become a profitable trader. Even if you get leverage at 10/1 you will still need a starting capital of £10,000+. This is one of the reasons I’m so against demo trading accounts. But that’s a rant so I won’t get started!

Strategies – Building the perfect trading strategy takes a lot of time. Back testing through previous years also takes a very long time. The issue with the strategy/system element is traders move around and become too aggressive with their trading strategies. When they fail or blow all their bankroll, suddenly its the strategies fault and not the fact you were putting 15% of your bankroll on every trade… Bankroll management is king.

Sports Betting Pros:

No TAX – Wow this is a big one for me. In the UK you don’t pay tax on sports betting winnings. I know in the US and other countries this isn’t the case. But if you are seriously making a lot of money then you might want to consider one of the tax havens, that goes for any investment earnings. Paying less tax is something I have been looking into for years. Originally having a business and paying 20-50% tax on earnings was hard enough. Nowadays with investing its down around 18%. But with sports betting you pay 0% (in the UK at least).

More hands off – It’s a lot less time intensive than forex trading. Sports betting is more geared around value for specific odds. However you calculate that value, whether you have a hunch (not recommended) or do statistical analysis and back-test results based on previous data (recommended). Once a model is created this is very hands off. You can simply bet where you see value and leave the results to play out.

“Inside Information” – In other types of trading inside information is illegal. People go to prison for decades for trading with inside information. It is a crime. BUT when it comes to sports betting, it seems the more you know the better. Why punish someone when all they have done is found out a start player isn’t playing before the bookies adjust their prices? Or that there is going to be a storm in the middle of a football match, making it much more likely that less points are scored and hence the under total points becomes the best play. But the most important element is that individuals “tipsters” (I hate that word) can give you plays in return for cash. Now you have to be incredibly careful with these people! BUT if you follow the most reliable tipsters you can make 500% ROI per year and that’s no exaggeration!

Sports Betting Cons:

Regulation – There are lots of regulations around where you can place bets. For example in the UK I cannot use Pinnacle or a number of other large sportsbooks. In the USA as previously mentioned I believe you have to pay tax on your winnings too and in some states sports betting is straight up illegal, so check the regulations before you get started.

Low Limits & The dreaded “exceeds maximum bet” – Unlike forex trading, when you make a bet/trade you are making it with the bookie itself. This means that as your bankroll grows you are more likely to be flagged as a very good sports trader. This means you are more likely to have limits on how much you can bet per event. This depends on the size of the event. For example the maximum bet on the superbowl is over 1 million for almost all sportsbooks. But the maximum bet for a small soccer game in league 2 would probably only be £500 in most places. Bigger events have higher limits as the lines are more carefully calculated, meaning the bookies have a higher degree of confidence and hence will accept larger bets. If you are with a sportsbook or bookie that says “exceeds maximum bet” for a specific result then it is probably time to move. This means they are on to your smart betting and don’t want you to take any money from them!

Conclusion

Personally I love both sports and forex trading. I will never stop one for another and I will be doing them both for years and years to come. But spreading “risk” and having some diversity is great. Back-testing sports betting strategies to see how much you would have made in a season is very similar to back-testing a forex trading strategy to see if your strategy is profitable. My biggest piece of advice would be don’t just rush into any type of trading. Build a strategy. Build your bankroll. Decide your bankroll management strategy. Good luck. Remember to check out our beginner ultimate guide and our free ebook for your forex trading introduction.

Tom is the owner of Elite Forex Trading. A website that provides beginner tips, trainings, reviews and strategies to help newbies get started making money in the forex markets.

Why do you trade forex?

Let me guess…

Because you want to make a crapload of money and be able to buy anything you wish?

While this is a perfectly valid reason, it will most likely lead to excessive greed and ultimately lead to your trading account’s destruction.

Forex Trading Vs Gambling Real Money

You might as well take your money to Vegas instead, and gamble it away. Once your money is all gone, at least it was entertaining.

You have to remember that what differentiates trading from gambling is being able to bend the odds in your favor.

That is why, as a trader, your mindset should be akin to that of the CASINO and NOT the gambler, who merely focuses on one event (or trade) at a time.

Casinos are profitable year, after year, after year, despite having a business where the outcome of each card laid down, dice roll, or slot pull is unknown each and every time.

They understand the concept of probabilities and create games that put the odds in their favor–in other words, “the house advantage.”

While it is true that there will be some lucky ones that will win and walk away with millions of dollars, casinos know that if they get a large enough sample size, there will be more losing patrons than winners in the end.

Let’s take baccarat, a popular card game for high rollers, for example. The game is fairly simple. Cards are dealt to a “banker” and a “player,” and all you have to do is place a bet on either one.

Since you have equal access to both the banker and the player (you can even bet on a TIE if you want), it would seem like you essentially have a 50% chance of winning. But in reality, that’s not the case.

By tweaking the rules, like charging a very small commission or reducing the payout if the banker wins with a certain number, the odds are turned slightly in favor of the house.

It might be a very tiny advantage, anywhere from 1% to 5%, but it’s enough for the house to eventually come out on top when enough games are played.

To become consistently profitable, you have to trade like the HOUSE and play the advantage over a series of outcomes.

You can do this in a couple of ways:

First, you need to learn the market behaviors, patterns, and tendencies that could be recognized in the future and turned into trading opportunities.

Forex Trading Vs Sports Betting

This comes from reviewing price action against a framework (support and resistance, mechanical indicators, economic events, etc.), recording your observations, and then devising statistics to keep track of the different kinds of patterns or setups.

This is where keeping a trade journal becomes a necessity. Using the data from your journal, you can focus on the setups that have had higher probabilities of winning, rather than those setups that tend to lose.

Forex Trading Vs Gambling Winnings

Secondly, you need solid risk management. You can tilt the odds of long-term success in your favor even more if you limit yourself to setting up or taking trades that have an attractive risk-management ratio (ie. average bigger wins than losses).

Forex Trading Vs Gambling No Deposit

The better the reward-to-risk ratio, the less often you need to win a trade.

Forex Trading Vs Gambling Losses

And lastly, you can look to other traders in addition to your own analysis. The web is loaded with free economic and technical analysis content. By getting a second opinion, you make sure that you don’t fall into the “confirmation bias” trap.

Of course, these aren’t the only ways to tilt the odds in your favor. But you should always remember that you don’t have to predict exactly where the market will go; you just have to figure out where price will likely go and make the best of it if the trade goes your way.