Foreign Exchange (FOREX) trading has become very popular in Nigeria within the last decade and a half, especially among young people seeking financial freedom. However, one question continues to spark debate both online and offline: Is FOREX trading gambling?
Some people think that it is so speculative that it’s no different from gambling.
Others insist that it isn’t rolling dice, and that it actually requires real skills to succeed with FOREX. They say that, given this fact, FOREX trading isn’t gambling.
What this Article will Do for You
In this article, we’ll review this means of making money. We will break down what FOREX trading is, how it works, and take a look at its nature compared to gambling.
We’ll also look at the state of FOREX in Nigeria, its benefits and drawbacks, and ultimately arrive at a clear conclusion.
So, if you’ve ever had questions like:
“What is FOREX trading?”
“How does FOREX trading work?”
“Is FOREX trading gambling?
“Is FOREX trading legit?”
Then you’re in the right place. This article will answer your most pressing questions about FOREX trading, and help you decide whether it’s something you want to venture into or not.
So, please read on.
What is FOREX Trading?
FOREX (short for “Foreign Exchange”) trading is the act of buying and selling currencies to profit from fluctuations in exchange rates.
It’s the largest and most liquid financial market in the world, with a daily trading volume exceeding $7.5 trillion as of 2022.
At its core, FOREX trading involves speculating on the price movement of currency pairs like EUR/USD (Euro vs US Dollar) or GBP/JPY (British Pound vs Japanese Yen).
Traders make money by predicting whether one currency will strengthen or weaken relative to another.
Trading takes place in pairs because currencies are always exchanged in relation to another. If you think the US dollar will rise against the Nigerian naira, you would buy USD/NGN. If the dollar increases in value as you predicted, you earn a profit. If it falls, you lose money.
FOREX trading is conducted via platforms like MetaTrader 4, MetaTrader 5, or broker-provided apps, where traders use technical and fundamental analysis to make decisions.
FOREX: A Global and Nigerian Perspective
Globally, the FOREX market operates 24 hours a day, five days a week, and includes participants such as central banks, commercial banks, hedge funds, corporations, and retail traders.
In Nigeria, FOREX trading has surged in popularity, largely due to:
- Increased internet access and mobile technology.
- Rising unemployment, pushing youths toward alternative income streams.
- Access to global trading platforms through online brokers.
According to data from the Nigerian Securities and Exchange Commission (SEC) and various independent financial research groups:
- Nigeria is one of the top 5 countries in Africa in terms of retail FOREX trading volume.
- Over 300,000 Nigerians participate in FOREX trading, either full-time or as a side hustle.
- Nigerian traders often use international brokers due to regulatory gaps, although the government has signaled plans to better regulate the market.
Is FOREX Trading Gambling?
The confusion between FOREX trading and gambling arises because both involve risk and speculation. However, they are fundamentally different in several key ways:
Skill vs Chance
FOREX: Relies heavily on knowledge, strategy, and analysis.
Gambling: Primarily based on luck.
Tools Available
FOREX: Traders use charts, indicators, economic news, and historical data.
Gambling: Gamblers rely on chance, gut feeling, or superstition.
Risk Management
FOREX: Traders set stop-loss, take-profit, and risk-reward ratios.
Gambling: Gambling rarely includes structured risk management.
Long-Term Profitability
FOREX: With discipline, consistent profits are possible.
Gambling: The “house” typically always wins in the long run.
Can FOREX Ever Be Gambling?
It can become gambling if a trader:
- Trades without a strategy.
- Relies on “gut feelings” rather than analysis.
- Over-leverages and risks more than they can afford.
- Treats it like a get-rich-quick scheme.
So, FOREX is not gambling by design, but it can become gambling in practice if approached recklessly.
Advantages of FOREX Trading
- High Liquidity: FOREX is the most liquid market in the world, meaning trades can be executed quickly with minimal price fluctuation.
- Low Entry Barrier: Many brokers allow you to start with as little as $10 or ₦10,000, making it accessible to most Nigerians.
- Flexible Trading Hours: You can trade 24/5, which fits well with side hustles or students’ schedules.
- Potential for Profit: With the right skills and risk management, traders can earn consistent income.
- Leverage: Brokers offer leverage (e.g., 1:100), allowing traders to control large positions with little capital. However, this also increases risk.
Disadvantages of FOREX Trading
- High Risk: The market is volatile. If you don’t have a proper strategy, you may lose your capital quickly.
- Emotional Stress: Constant market monitoring and financial loss can lead to anxiety and stress.
- Lack of Regulation in Nigeria: Many Nigerian traders use unregulated or offshore brokers, increasing the risk of fraud.
- Learning Curve: Success in FOREX requires time, patience, and constant learning. Many traders give up too early or rush in unprepared.
- Leverage Risk: While leverage amplifies profit, it also magnifies losses. Many beginners get wiped out due to over-leveraging.
Should You Trade FOREX?
Bear this in mind: 70%-80% of all beginner FOREX traders lose money. And at least 80% of traders quit within the first two years of trading.
Now, we won’t tell you whether or not you should trade FOREX part-time, or even become a full time FOREX trader. That’s up to you to decide.
But we will tell you what you should consider before deciding whether to get involved in FOREX trading or not.
Before diving into FOREX trading, it’s crucial to evaluate whether it aligns with your goals, risk tolerance, and lifestyle. Here are key factors to consider:
- Financial Stability: Only use disposable income for trading. Never risk rent, tuition, or emergency funds. Losses are part of the process, and financial pressure can cloud judgment.
- Risk Tolerance: Can you handle financial losses without panic or emotional trading? If not, FOREX might be too volatile for you.
- Time Commitment: Successful trading requires time for learning, strategy testing, and market analysis. If you can’t dedicate time regularly, passive investment options may be better.
- Willingness to Learn: FOREX is not a get-rich-quick scheme. You must be willing to study technical and fundamental analysis, risk management, and trading psychology.
- Mental Discipline: Can you stick to a plan and avoid emotional decisions? Overtrading, revenge trading, and greed are common pitfalls for undisciplined traders.
- Access to Reliable Tools: Ensure you have access to a stable internet connection, a trustworthy broker, and a trading platform like MetaTrader 4/5.
- Regulation and Broker Choice: Choose a broker with a solid reputation and preferably regulated by authorities like CySEC, FCA, or ASIC. Avoid unregulated or suspicious platforms, especially those making unrealistic profit promises.
FOREX trading isn’t for everyone. But if you decide to pursue it, be sure to approach it with preparation, and a long-term mindset. This is what makes the difference between a trader and a gambler.
Warning!
Now, here’s some warning you need to heed.
You may see advertisements online or on your local radio stations, in which self-proclaimed FOREX traders guarantee outsized profits from trading.
They may promise things like double digit profits (e.g. 20%) in a single month.
And they will invite you to sign up for their courses or seminars.
They may even request that you deposit money with them, so that they will “trade” on your behalf and share profits with you.
THESE ARE SCAMS. DO NOT FALL FOR THEM!
FOREX trading does not guarantee profits, let alone double or triple digit profits in a week or month. Its volatile nature forbids this.
Stay vigilant!
Wrap Up
Here’s our summarized answer to the question, “Is FOREX trading gambling?”
FOREX trading is not gambling when approached with the right knowledge, discipline, and strategy.
But there are also real risks. Most FOREX traders will lose money. Losses are much heavier among new traders, who often lack the skills, experience, and emotional control needed to successfully navigate the volatility of currency markets.
In Nigeria, it has empowered thousands of people to earn online income, but it has also led many to lose money due to lack of training or greed.
Like any professional field, FOREX rewards those who educate themselves, stay disciplined, and respect the risks involved.
If you’re considering FOREX trading in Nigeria, treat it as a business, not a game of chance. Learn first, start small, and never trade with money you can’t afford to lose.
