Is FX Gambling? A Final Word on the Controversy
Thank you for your hard work!
This is Nobushi!
In this article, I have been trading for over ten years now.
This debate has always been conducted on Twitter and in various other places.
And recently I started receiving many messages and comments from people,
and it is one of the common topics I am asked about regularly.
That is,
“FX basically is gambling, right?”
It’s a controversy.
This time, in “my own way,” to put an end to this controversy,
I’ve tried to create “my own” answer, so if you’re interested please read to the end ^^
Now, first I’d like to review yesterday’s Winner trades!
I was shouting about it in real time on Twitter as well (it’s more than just a tweet now)
First, I started by buying the EUR/USD second wave up.
At that moment the 1H chart was bearish, so it was a counter-trend against the higher timeframe.
So the initial plan was to cut losses quickly if it went against me and take profits immediately if I gained.
But...
It has continued to move against me cleanly! LOL
It dropped without ever becoming a profitable position by the stop loss target, so I quietly cut.
-14 pips
But it’s a secret that it bounced back to break-even right after the stop loss. Let’s forget it.
And soon after, this time the GBP/JPY moved into a Buy 2nd wave
This time both the 1-hour and daily charts supported an uptrend,
so I entered with confidence.
What I’m doing is really simple, isn’t it?
But this is the trade with the highest expected value, so I had no choice.
This time it continued to rise without a single drawdown, so I took profits!
About +23 pips
After that, the USD/JPY also gave a signal
As it followed the signal cleanly, I then took profits
+11 pips
So across three currencies, about +19 pips in total!
In fact, yesterday’s trades were exactly related to what I’m going to talk about from here on.
Whether you read this article or not, it could significantly influence a beginner trader’s life (not to overstate it).
Now, here is the main topic.
“Is FX ultimately gambling?”
Here, “gambling” probably refers to
“something whose outcome is determined by luck alone, or where most of it is influenced by luck”
I’ll assume that.
Moreover, many people who mock FX as gambling intend to use the word “gambling” that way, right?
If we take this as a premise, the answer to the title is “No.”
In other wordsFX is not gambling.
Just depending on how you trade, you can make it gambling, or make it less so.
Because FX allows you to choose to trade at moments you feel have high edge, with “a large edge you feel,” and you can withdraw “in whatever amount you like” when you feel the odds are against you,and you can do so “as you see fit.”
In other words, depending on your approach, you can trade only at moments with high expected value.
If we take the classic gamble example of a coin flip,
it’s a two-choice guess of heads or tails, so theoretically 50:50.
The expected value is break-even, so if there are fees, you’ll end up negative the more you play.
I’m known to be fond of casinos and mostly play “poker” and “blackjack.”
Because these two are not gambling.
There are solid strategies for these two (not guaranteed wins or holy grails), and you can go big at moments with high expected value.
In simple terms, by counting the dealer’s and your own hands, and the cards that have come out so far, you can spot favorable moments and wait for that moment to maximize expected value and then go big!
Of course, even when the expected value is high, the win rate isn’t 50% plus, it might be 55% to win.
However, even if you win only 55% out of many tries, continuing to trade at those high-EDGE moments is essential for long-term profitability.
That’s FX as well—perhaps even more important than in card games—how to raise the expected value and how to enter trades during those moments is key.
At this point, a smart person might think, this is a bit different from luck-based gambling, right?
But even smarter people think this:
Wait, aren’t there moments where the expected value is below 50% as well?
If you kept trading only those moments, you surely wouldn’t win, maybe gambling is worse than that, right?
Exactly.
FX is not gambling in the sense that it’s harder to win than gambling!!
So if you don’t understand this, either quickly go gamble for money, or do gambling trades and you'll make a fortune!
I won’t tell you not to, but please don’t touch FX because it doesn’t make you more money than gambling!
So why did Nobushi start trading FX at all?
If you flip it, if you can enter at moments with high edge, you can achieve a higher expected value than gambling, right?
That’s what I thought ten years ago.
Since then I have obsessed over finding entry points where the edge is high—that is, points where after entry you reach the profit target before a certain drawdown.
This isn’t a fixation on 100% win rate, but a dogged pursuit of a 56% edge.
If you don’t produce a higher expected value, there’s no point trading FX.
And another important thing: in card games, when you think you have a winning hand, you can go all-in in poker or double down in blackjack to make a high-EDGE move;
this is incredibly important, because when the expected value is extremely high, using the same stake as usual will just lose out.
In a few hours you’ll be gone.
This is also true in FX.
When the probability of winning is high, you need to go big and “ride the profit”
Of course, while managing risk!
What I often do is,
Enter according to the Winner signal: at this point the expected value is high (based on past chart analysis)
If profits ride as expected, at this point the reliability of my signal increases
Place the stop at break-even as the position becomes advantageous: now is the time to take the risk (high-EDGE trading)
And just repeat this.
It’s simple, right?
Of course there are many times when you go big and end with a small loss or break-even as price returns to break-even.
After all, a high expected value doesn’t mean 100.
But since it’s a matter of probability, you have to keep doing it over the long term.
Conversely, movements that diverge completely from expectations, like yesterday’s EUR/GBP, should be cut quickly.
Holding on in that situation is equivalent to taking a low-expected-value big risk.
Even if you push it to break even, you’ll eventually die. In probability terms.
Some traders say, “Proceed calmly (tantanmen?),” and that’s exactly right.
Keep betting on the side with higher probability. End of story. That’s trading.
Trading with a 56% win rate and losing at 44% is why you cut when needed—and that’s all there is to it (numbers are just examples).
So what is the “essence” of trading?
① The skill to identify moments with high expected value
② Whether you can properly take a trade at that moment
③ Not trading at negative expected value and cutting quickly
End!!
Well, it’s easier said than done...
But ① is guaranteed by Winner.
The 1-hour Winner signal and the direction of the Winner 2-wave are certainly advantageous.
② and ③ come with practice.
If you’re always aware of your current expected value, you’ll develop it!
If not, ask me!
Well, I’ve talked at length, but
FX is if you’re doing the wrong things you certainly won’t make more money than gambling!—that’s what I wanted to say! haha
If you’re doing it, do it in the right market conditions with the right moves!!
By the way, Winner is on a limited-time price sale now ↓ haha
