Forex versus online poker

By means of the article “Online forex trading versus investing in shares” you could already have obtained a rather nice image of the possibilities concerning online forex trading. In this article we’re going to take a look at the similarities and differences between online forex trading and online poker.

Recently the backgrounds of the most successful forex traders were examined. And what appeared to be the outcome? A great extent of the successful forex traders are playing poker or have been playing poker in the past. Could this be a mere coincidence? Definitely not! Forex and poker bear a lot of resemblances.

Do you currently play poker or have you been playing poker in the past? If so, you surely are in an advantageous position! If you have never touched the cards yet, there’s still nothing the matter. Nonetheless you’ll have to recognize the importance of aspects like psychology and risk management, the kind of concepts a poker player already has common knowledge of. It so happens that these aspects are being pretty underestimated and this could mean the difference whether you will or will not become a successful forex trader.

Tilt; Mother of all Evil!

Tilt is a tricky notion to clearly clarify but the bottom line is that your actions deviate from what you under usual circumstances should do. This could mean that you risk too much per trade or that you open a position against knowing better, whereas the circumstances are anything but optimal. Of course tilt can occur in several gradations, but the fact that it is disastrous for forex trading as well as for playing poker definitely is a sure thing!

It would be going too far to clarify all the possible dangers in this article, but be aware of the fact that it is very important, let alone a must, to have and keep yourself psychologically under control. Emotional feelings like fear, greediness, anger and impulsivity shall all have to be strictly under control. If this isn’t the case, or if this is insufficiently the case, you’ll never going to be a profitable forex trader!

You may possess all the necessary knowledge, the best poker strategy or the best forex trading system, this will all be of NO value whatsoever if you’re going to fall into the psychological pitfalls, which will definitely come and look around the corner!

Only play when you have an edge!

While playing poker folding is your strongest weapon and the same goes for forex trading. Folding or not opening a position could be the best decision in many situations. Like they say while playing poker: Only play when you have an edge.

While playing poker you’ll get an advantage when either you have a better hand than your opponent(s), or you can let your opponent(s) fold a better hand. During forex trading you’ll create a benefit through increasing the chance of a good trade when the circumstances are as much as possible to your advantage. How to be able to create that edge exactly, you’re of course still going to learn.

Calculation of probability; you can’t win them all

Except for the necessity to have an edge, your mindset also ought to be correct and you’ll have to understand the real meaning of this edge.

While practicing forex and poker the calculation of probability is of great importance. Related to online poker there is a classic example telling us that with AA against 44 you’ll have a chance to win covering 80% against 20%. This doesn’t mean that you’re going to win every time you have AA. On average you’ll have a winning chance with a rating of 4 times out of 5 times, but you should realize that this chance is based on the long term and that this doesn’t need to say anything about the short term or about the situation on that very moment.

The same goes for online forex trading. You may recognize a perfect set-up and there might be a fair chance that the trade is going to lead towards a positive result. However this is not to say that it’s really going to happen indeed. There could always be a question of a certain capriciousness as well as unexpected influences, which you as a forex trader cannot affect. In the long term you’ll be successful handling this set-up, but that means nothing with regard to the next trade due!

So it’s very important for you to have a good mindset. When you let the law of large numbers do its job, you’d be profitable on the long term. If you don’t have a long term vision, you’ll be in big trouble!

A good risk management is THE foundation of your success!

Realizing the significance of the law of large numbers and creating a long term vision is very important. When you’re doing this, it so happens that you’ll understand the importance of a good risk management.

A bad risk management is disastrous. When each time you keep on risking too much money a trade, the risk of losing all of your money is consequently too imminent when lady luck is not on your side even for a short while. And without money there will not be any more forex trading at all. It’s like water and food for human beings. You can’t do without it, so take good care of your foundation.

By handling a good risk management you’ll be able to let the law of large numbers work to your advantage. You’re trading with an edge and because of the fact that your buffer is big enough you’re going to make profit on the long term. In the worst case you could be suffering from tilt and consequently you could make wrong decisions if it’s about your trades. This might occur, but as long as you keep on handling a good risk management, the damage could never be that big.

The differences between online forex trading and online poker

By now we have discussed the most important similarities and as you can see forex and poker are rather similar to each other concerning a number of very important items. However there are also essential differences and when you come from the world of poker this could provide food for thought……

Differences concerning legality and tax

At this very moment online poker is still illegal in a lot of countries, which isn’t exactly an ideal situation. On the other hand online forex trading is completely legal!

Even as far as tax goes, there could be a big difference depending on the country where you live.

In case of forex trading your opponents remain the same

In case of online poker it’s characteristic that the opponents playing on the lower limits are considerable less good than the opponents playing on the higher limits. At the beginning you’ll be able to win games on the lower limits using a basis strategy, but if you even want to win higher amounts on the higher limits, you’ll have to get better and better all the time.

In case of online forex trading there are no different opponents. Whether you trade with $100 or with $1 million, your opponents (the forex market) remain the same. At the beginning this could be a disadvantage, as you’re first going to need a profitable trading system to be able to trade in a lucrative way, but on the contrary this finally appears to be a big advantage. Once you have a profitable trading system at your disposal, the possibilities will be endless!

Having $1 million on your forex account, it so happens that the difficulty has not been changed at all. In case of poker however with such a bankroll you should have to take on professional players against which it’s very difficult to really get an edge.

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