Comparisons are often drawn between forex trading and online poker as two ways to make money online, with many poker players branching out into trading, particularly ex-grinders in the US.
FXBrokerSearch, a sister site of Rakeback.com, has compiled data on the best FX brokers online for its readers looking to make money outside of poker.
Forex (foreign exchange, or FX) is the trading of international currencies. A world-wide network of banks, businesses and individuals, the FX market is the basis for global trade of goods and services. Its daily turnover exceeds $4 trillion.
Individual FX traders analyse fluctuations in the financial markets, then buy and sell currencies at the perfect moment to turn a profit later when their values rise and fall. This is done through FX brokers, middle-men between the trader and the 'interbank'.
This is analogous to a poker player watching changing game conditions and exercising table selection to join +EV lineups. They scan the lobbies of online poker rooms, the intermediary between them and the wider playerpool.
Individual FX traders however don't take deliveries of currency - saying they 'buy' and 'sell' is in reality shorthand for placing bets on how a currency will move. Their bet is essentially an earnest money deposit paid to the broker in return for using the broker's funds plus borrowed leverage to trade.
This can be compared to a poker player sizing his bets and buy-in amount to control swings playing staked with makeup.
Businesses need to convert currencies as part of their day to day operations. Without traders participating in the FX market, they may struggle someone to sell to. Trading spreads (the difference between buying and selling prices) would be larger in a non-liquid market. Traders increase market efficiency, allowing currency trades to move faster and the market expands.
The analogy here would be how grinders are the lifeblood of a poker network, starting games, multi-tabling, and creating more action for recreational players simply in the game to play rather than make a living.
Poker players generally agree that treating the game like a business and constantly making +EV decisions over a large sample size while adequately rolled cuts out the luck element.
Forex trading is no different. The 'sharks' of Forex use technical analysis, tracking software, live charts, market data, pay for private coaching, attend webinars, monitor financial news and join forum communities.
FX traders assume risk which commercial interests wish to shed, in order to make a gain - this is defined in FX as 'speculation'. Gamblers however, generate additional risk where none existed.
Many of the soft skills poker players possess directly translate to success in Forex trading, such as discipline and bankroll management.
Traders should have a clear plan, analytical approach and take breaks to avoid acting on emotion. Tilt can manifest itself in the same ways as in poker, e.g. 'revenge trading' - doubling your position on a trade in an attempt to recover losses from the last trade.
Standard advice is to never risk more than 5% of your account on one trade, similar to the 20 buy in rule in poker. Traders can also set stop-loss instructions to automatically close their position when market rates fall to a given level.
The multi-tabling FX trading grind, image credit TwoPlusTwo BFI Forum
FX brokers make their money through commissions / service fees and the spread. As with poker rake, it's still possible to beat the game. A handful of no-commission FX brokers exist - opt for these to lose only to the spread.
Another way to increase profits is to make use of FX brokers offering rebate - essentially this involves signing up through an affiliate like FXBrokerSearch that represents brokerage firms, receives a marketing commission from them and passes a percentage of this onto you, the traders they sign up.
You still trade under the same conditions as if you registered with the broker directly, exactly the same as how flat affiliate rakeback deals work on online poker sites.
FX brokers with a signup bonus are another staple for traders looking to reduce costs. Earn your bonus in instalments as you trade, just like the welcome bonus period after first depositing on a poker room.
Check the FXBrokerSearch Promotions Feed for additional cashback bonuses, trading incentives, free coaching and more.
ECN brokers use Electronic Communications Networks to directly match trades between two parties, and consolidate price quotes from multiple sources. The upshot for the trader is a tighter spread, however a fixed commission is paid on each trade. These brokers also cannot trade against you - an allegation levelled at some unscrupulous brokers.
ECN brokers could be compared to playing on more reputable, high security, lower rake poker networks like PokerStars. Transitioning to an ECN broker is recommended for high-volume traders.
For legal online poker in the US, try Americas Cardroom.
Most brokers offer a demo account to practice trades with zero risk - the play money of Forex. Unlike play money poker, demo trading is as serious as the real thing - your account reacts to external market forces. Traders with years of experience still use their demo accounts occasionally to try out new ideas. Contests even exist awarding the best demo traders with cash prizes, similar to freerolls in poker.
After verifying your ID docs with support you could jump into real-money trades at over 40 rooms with a minimum deposit of $100 or less. New traders can start with a Micro account, 1/100th the size of a standard account, moving up in stakes to a Mini account and finally a Standard account.
In the past foreign exchange trading was the domain of banks, hedge funds and the very rich, with minimum deposits in the thousands a barrier to entry.
Technological advances in Forex offer more analogies to the online poker boom. Traders can get on the trading platform via desktop, browser or mobile, and use software programs akin to Holdem Manager to review their performance.
Like poker, forex trading is naturally a location independent profession, allowing you to work online from anywhere in the world, e.g. Thailand, Vietnam, or Hong Kong. Thailand is the most popular destination and has some local Thai poker sites and forex providers.