By James Harte
Read 'em and Weep
For those of you familiar with poker you might have noticed that many of the qualities and skills found in good poker players are often found in good traders. Both can be rewarding ways to earn money and both practices require a lot more internal control and skill than you might think.
Let's take a look at some of the top qualities of highly successful poker players and think about how they apply to Forex trading.
1 - Discipline and commitment
One of the key ingredients to achieving success in poker, just as with Forex, is having the discipline and the commitment to stick to a plan and avoid impulsive behavior. For those unfamiliar with both poker and the markets, they might seem like unorderly environments. However, in both, the commitment to a methodical approach and the discipline to avoid straying from one's plan, is instrumental in being successful. Poker players and traders both need to be able to deal with stressful and also exciting situations without compromising their plan.
2 - Accurate and efficient decision making
In both poker and the markets, you need to be able to assess the information quickly and make accurate, effective decisions. The slightest hesitation can be very costly. Having a disciplined approach makes decision making more efficient.
3 - Comfortable with change
Each card dealt changes the environment in poker, just how each candle formed changes the environment in Forex trading. Pokers players need to be able to adapt to changing environments in a calm and fluid way in exactly the same way that Forex traders need to be able to respond to a dynamic environment, such as during a news release. Having strong decision-making skills makes it far easier to cope with changing environments.
4 - Comfortable with losses
Contrary to what you might believe, the most successful poker players are not the ones that win every hand. Indeed, some highly successful poker players can go through lengthy drawdowns before reclaiming their losses. This is exactly the same with Forex trading. To be successful in forex trading, you don't need to win every trade, and with good risk:reward, you can even lose more than you win and still be successful. However, you do need to be comfortable with losses and have the patience and discipline to stick to your plan.
5 - Confidence
As with all areas of life, a confident approach tends to work best in both poker and Forex. This is not to be confused with a cocky, arrogant approach, but merely having the confidence to stick to your plan and execute your hand or trades as you intend to. For example, when you have taken a series of losses, it might get harder and harder to take each trade, but you need to have the confidence to stick to your plan and ride through the losses. Confidence in your strategy makes it easier to deal with losses.
6 - Knowing how to play
This one might seem obvious, but know exactly how to play is a key component for success in poker playing and indeed, the same is true with forex trading. Traders need to take the time to learn how to trade properly before jumping into the markets.
7 - Handling cashflow
Poker players need to manage their kitty effectively. Risking too much at any one time can damage their overall position and ruin their longevity. This is exactly the same with forex trading. Traders who risk too much might get lucky and win a few big trades, but as soon as they hit a drawdown period, their aggressive risk profile will typically wipe them out.
8 - Being comfortable with the role of chance
Although players can approach poker with a plan and hone their skills, great poker players always acknowledge the role of chance in both their wins and losses. The same is true with trading. There can be times when you are holding a trade, and a central bank official hits the wires with comments that unexpectedly see your trade reverse against you for a loss. There is no escaping the role of chance in trading but having a solid strategy and sticking to your plan will ensure you are successful in the long run.
9 - Mental and emotional stability
There is no denying that poker can be a fun and exhilarating way to make money. However, it can also be truly stressful and traumatic for those who are not equipped, both mentally and emotionally, to deal with the wins and losses. This same strength is just as important in Forex trading. Traders need to have solid emotional and mental balance to cope with drawdowns to cope with sticking to their plan in both winning and losing situations and to maintain the patience necessary to be successful.
10 - Long term mindset
There is no doubt that those poker players who achieved the highest level of success in trading, are the ones who view it as a long-term commitment and seek to maintain consistent, low risk, positive returns over the long run. Players who sit at the table looking to win big immediately, usually don't do very well. This exact same mindset is needed to be successful in forex trading.
It can be extremely tempting to think about the sort of returns you could achieve din one day or one week, or even a year, but that is often a treacherous path to head down. The traders who really achieve their dreams of wealth and success through trading are those who take a realistic and manageable approach and demonstrate solid commitment and discipline over the long run.
Hopefully, now you can see that whether you are sitting at a computer desk or a card table, the skills needed to reap the rewards you desire are incredibly similar. If you're interested in learning more about these skills, then make sure to keep checking the website as we bring you some more insight into the psychological side of trading.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.