Traders' Hub: Forex And Poker - Do They Really Have A Load of Differences?

(OR, WHY THE SOONER ONE TAKES THE MIND SET OF A PRO POKER PLAYER, THE CLOSER HE GETS TO BECOMING A SUCCESS IN FOREX TRADING!)

Ever since I started out as a forex trader in 1985, I have been taught to draw a clear line between forex as a legitimate investment instrument and other forms of gambling like poker games!

When I myself became a trainor and trained neophyte forex traders in the late 90's, I always made it a point to make sure that each one of my trainees understood the reason why forex, in stark contrast to poker, can not and should not be considered as a form of gambling!

Richard Alcantara, EzineArticles.com Basic Author

Poker and all other forms of gambling are games of chance... devised by man... purposely and solely for players to play the odds (or take the risk) by placing a bet - - - in the hope of landing a winning hand to be able to pocket the pot.

In contrast, forex trading is not a purposely concocted game of chance!

Foreign exchange evolved naturally out of the need to finance the fast pace of globalization and the spread of commerce between nations. Traders buying goods or availing services from other countries created a demand for each others' currencies. This in turn created a tremendous business opportunity for banks and brokers and their intermediaries to indulge in the business of sourcing out and exchanging currencies in behalf of the international traders - for a profit... giving birth to what we know now as the foreign exchange market. In short, forex was born out of the necessity to have an indispensable tool to achieve success in the trading with other countries.

But, alas, the disimilarities between the two, I soon enough realize, ended there! There are in fact much more similarities between poker and forex trading than I thought of and which I finally discovered.

I soon realized that the longer I made myself believe that forex is something totally different from poker, the farther I ended up from making more profitable trades. The longer I held to the belief that forex and poker can simply not mix, the more frequent I ended up with more losing trades. To my chagrin, I soon came to the realization that to be a successful forex trader, I need to adopt the mind set of a professional poker player. True enough, after I did, I finally put a stop to the habit of losing money which other wise I shouldn't!

So what is the mind set of a professional poker player that every forex trader must adopt?

A professional poker player recognizes the fact that poker is a game of high variance cloaked with a high degree of unpredictability. Because of these, he has prepared himself, on the onset, to accept the fact that he can not win the hands all the time. He is prepared to take loses in a stride!

The forex market is just as unpredictable. Like a poker player, the forex trader must understand and accept the fact that he will encounter losses along the way. He must learn to maintain his focus and composure even when the market is going up against him.

A professional poker player always looks at the bigger picture and does not care too much with individual hands or sessions. He refuses to be obsessed by short term results and will not go on a tilt at the table by chasing money that he has lost, refusing to quit when behind, and making rash changes to his game.He knows that the only thing that matters is making the right decision. He knows that if he makes the correct decisions, the actual result of a particular hand or session is irrelevant, because he will be a winner in the long term.

In a parallel comparison, I have seen many upstart forex traders who would over indulge themselves with losing trades and changes their game plan altogether by hanging on to the bad trade disastrously too long.

A professional player will not "play scared" of losing the money in front of him. He knows enough of the game's bankroll management principle and always comes to a table only with money he is prepared to lose. He knows of he plays with "scared money", it will be very difficult to make correct decisions at the table. He might not protect his hand properly, not value-bet enough, play too tightly, or not bluff enough.

Similarly, a forex trader must not play with money he can't afford to lose! He should only invest that part of his liquidity called 'risk capital' - or that part of his liqidity which, if lost, will not affect his and his family's normal lifestyle.

A professional poker does not let ego nor emotions get on his way. He will not call bets just because he doesn't feel like being pushed around. He will not call bets just to try to impress his opponents nor allow a personal feud to cloud or override his judgment. He knows that anger and frustration can make players player go on tilt and start spewing chips - this he has avoided.

Like poker, forex trading can be a very very emotional experience! But, like a poker pro, a forex trader must learn how not to allow ego and emotions to interfere with his decision making process.

With the mind set and the discipline of a professional poker player, even an upstart forex trader may well be on his way to a successful and profitable career!