The Forex Casino

The Forex market is like a casino, but it’s up to you to decide whether you’re going to be the punter or the house. In other words, the loser or the winner.

Gamblers love casinos, but casinos don’t gamble. The house only plays games that it knows will consistently beat the gambler and so, even though the house and the gambler are playing the same game, the game’s designed to make sure the house always wins in the long run.

The casino has no idea if the next game of roulette will be a winner or a loser and it doesn’t care. What it does know is that for every £100 it pays out in losing games, it will earn between £105.56 and £107.89 in winning games. It knows this because it made the rules and the rules incorporated a “house edge” which guarantees a winning percentage in favour of the casino of between 5.56% and 7.89%.

The casino knows the house will make money and the punter will lose money. That’s the casino’s edge over the gambler and it only ever plays games where that edge exists and can be relied on.

This is why it’s paramount in trading that you declare you are “the house” and the market is your punter, rather than the other way round. You make the rules, your trading edge, and stick to those rules like glue. You have to guarantee that “the house will make money and the punter will lose money. That you only ever take trades where that edge exists and can be relied on”.

If a casino has a losing run, it won’t start changing the rules to fit what happened in the last few games. It will play the next game precisely the same way as it played every previous game, and, sure as casino chips is chips, it will make its money back and a healthy profit on top.

If you have a losing run of trades, it’s equally important that you don’t start changing your rules. You don’t start taking profit early, you don’t start chopping out of a losing trade before your rules tell you to, you don’t start skipping trades because “it doesn’t feel right”. If you’ve tested your strategy and know its profitable, then you need to have faith that your edge will prevail in the long run. If you change the rules on a whim you instantly become the gambler and the market will take your shirt.

It’s up to you to decide whether you prefer the dead cert odds enjoyed by the casino, or the slow, certain bankruptcy of the gambler.

And you make that choice every time you place a trade – only you know if you followed the rules or took a punt.

Happy Trading

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