Poker is a game of intricate strategy, emotional strength and mental endurance, all of which can relate to trading Bitcoin and other cryptocurrencies.
Unlike traditional markets, cryptocurrency is decentralised making it accessible to anyone. This means that being able to purchase, transfer and sell Bitcoin is incredibly simple, making it ideal for poker players who want to stake fellow players and transfer capital around the world.
But it goes far deeper than just being a handy tool that allows users to transfer money to their peers, as the key to being a successful Bitcoin trader is very similar to that in poker.
Bankroll management is critical. In poker, if you have a bank roll of $10,000 you would be foolish to enter a tournament with a $2,500 buy in as a couple of bad river cards would wipe the entire roll.
Risk reward ratio
The same theory works with trading Bitcoin. Traders are very cautious about using too much of their capital in any one trade as, like poker, it’s a law of averages.
Every trade needs to be entered with a predefined set-up. For example, if a trader was to ‘long’ Bitcoin at $8,000 with a target of $8,800, they would stand to make 10% profit if it played out.
However, if the market moved the other way the trader would be intelligent to place a stop loss to cap potential losses at 2%, which in this case would be at $7,840.
The risk/reward ratio on the trade is 1:5, which means it could go in the wrong direction on four occasions and still be profitable over a long period of time.
It’s the same in poker. If you call a big bet on the flop as a 65% favourite, in the long run you will be a profitable player. It’s all about stacking the odds in your favour against the opposition.
Being ’tilted’ in a poker tournament or cash game is one of the common mistakes losing poker players often make.
It is caused after a loss or a bad beat and it impairs decision making as a result of being emotionally angry, upset or frustrated.
The same applies in trading Bitcoin. The instinctive response for a lot of people when losing a trade is to put more money on to try and earn it back.
This is in fact the worst thing a trader can do, as often the trade they are putting back on will have no strategy or foresight.
Training your brain to act like a robot, without emotion or impulse, is absolutely crucial for both poker players and Bitcoin traders, which may be the reason why so many poker pros have made the leap across to the volatility of cryptocurrencies.
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This is not financial advice
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.