Many people compare trading to poker and in truth, there are some similarities between the two. In fact, there are nice anecdotal stories about poker players who make it big trading. However, the bottom line is that there are more differences to similarities between trading and playing poker and here we will look at the most obvious ones.
Knowing Your Opponents
In poker, players know their opponents. If you sit down at a poker table you can analyze the strengths and weaknesses of your opponents and even move to a different table if you want. However, when you are trading, your so-called opponents are spread across the globe and include both individuals and organizations, humans and automated systems. There is no way to even know the volume of people trading at any one moment and certainly you would not be able to find more favorable opponents.
Defining Your Losses
When you play poker, you can define how much you will lose in any one sitting. If you take a specified amount to the table, it is simpler to limit your losses to that specific amount. However, when trading, you can lose everything you have in a single trade if you don’t cut your losses yourself when necessary. This is one of the aspects that many traders find the most difficult to do.
The Known vs The Unknown
There is a lot more in trading that we don’t know compared to in poker. In poker, we know who our opponents are, we know how many cards there are in the game and we can generally work out the odds. What we don’t know in poker is the cards that our opponent is holding, although even this is limited and if you are a talented poker player, at some point you will gain a pretty good idea of what they are. In trading, however, the unknown is far greater than the known. There are charts and analytics that are used in trading, but while traders examine historical data, the past cannot predict the future when it comes to trading.
There are very few influences when it comes to playing poker. In fact, all that matters is what is happening right in front of you at your table. When it comes to trading; however, there are a myriad of outside influences that will impact the trade. In fact, just about everything going on around the world will influence your trade, from financial markets to weather patterns. Because of this, when trading, it is vital to stay on top of all national and international news and understand how this may impact the forex market.
While the outcome of a poker game and of a trade are not guaranteed and both are impacted by probabilities, the similarities seem to end there. There are far more differences between trading and poker and this means that just because you are talented at one, does not mean that you will automatically be talented at the other.