Whether it’s playing high-stakes poker or trading cryptocurrency, significant losses unfortunately come with the territory – even for the most seasoned professionals.
This week, renowned poker professional Phil Galfond detailed his gruelling downswing that equated to a €900,240 loss, prompting him to pause the ‘Galfond Challenge’.
The 35-year-old said that he is “taking a step back to do some thinking” in order to regain the neutral mindset that gives him an edge over opponents.
Unfortunately, my downswing in the first #GalfondChallenge has very much continued.
I’m taking a step back to do some thinking. Here’s an update, along with some more of my thoughts: pic.twitter.com/jIcN4Bc1Jz
— Phil Galfond (@PhilGalfond) February 11, 2020
The stories of poker losses are widespread, with several professionals confessing to upwards of seven-figure losses.
The issue is not just confined to the poker industry, it also translates to the cryptocurrency ecosystem with traders often struggling to predict the volatile nature of digital assets.
Bitcoin surged to a stunning all-time high of $20,000 in late 2017 before falling towards $3,150 within the space of a year.
While some traders capitalised on its decline by shorting Bitcoin on derivatives exchanges, the majority of ‘holders’ found themselves wiping away a significant portion of their respective ROI.
A lot of money to be made or lost with low market cap coins. I don’t do as much trading as I used to but the inexperienced can get wrecked down here if not careful 😳#crypto #NOAH #MXM #VEST #cryptocurrencymarket #cryptocurrency pic.twitter.com/CmOctpBbw9
— ✨John “The Limit” Walton✨ Crypto/Darts/Retro Games (@bigjohnlimit) December 4, 2019
One trader detailed how he lost $139,000 by trading cryptocurrencies during the 2018 bear market, admitting to a “whole series of mistakes” that eventually saw his once flourishing account hit zero.
“To say that emotions are profit killers is an understatement,” he said.
“Paradoxically, being emotional creatures, we underestimate the importance of emotional intelligence (EQ).”
This is where the losses usually stem from; when a poker player or trader has a significant win, naturally the emotions flip towards feeling of euphoria and increased self-esteem.
Poker and trading strategies
The most important thing for traders and poker players to consider is recognising changes in emotional state.
If one begins to feel euphoric, almost as if they can’t lose, it’s usually a time to step back and re-evaluate in order to carry on sticking to a winning strategy.
Feelings of elation of euphoria can lead towards taking more risks and poor decisions. The key for traders is to always have a strategy before they enter a trade and always stick to it, regardless of the direction of the underlying asset.
For example, every trade needs to be based on conservative management of capital as well a good risk/reward setup.
In terms of cryptocurrencies, if a trader were to hypothetically buy Bitcoin at $10,000 with targets at $11,000 and a stop-loss at $9,800, they would be risking 2% of the order in order to potentially earn 10%.
Days like today are the ones that set a difference between successful traders and permabulls. If you had the right risk management strategy you are totally fine, if not… trapped and taking emotional decisions. #Bitcoin #CryptoCurrency
— Crypto Rand (@crypto_rand) January 16, 2018
This 1:5 risk reward strategy means that even if the market went against the trader on three or four occasions, they could still come out with a positive ROI.
A common mistake is that when the underlying asset swings during a trade, the trader will be tempted to change strategy by adding more to a position or moving the stop-loss to preserve profits, most of which will be based on a shift in emotional state.
It’s vital for traders, especially if a trade goes in the wrong direction, to take a step away from the trading platform in order to regain a neutral mental state.
This is what ultimately separates long-term successful traders and losing traders, it is not simply picking a profitable trade based on technicals and fundamentals, contrary to popular belief.
For more news, guides and cryptocurrency analysis, click here.
Disclaimer: This article should not be considered as financial advice.
The post How to deal with massive poker and crypto trading losses appeared first on Coin Rivet.