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#Post#: 327--------------------------------------------------
Poker & Trading (leveraging on poker success)
DIR By: fxvictory
Date: March 8, 2015, 10:33 am
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Hi guys, this thread is for those who have been successful
professional poker players, or at least are significant students
of the game, and are struggling in the transition to trading. I
do not declare myself as a successful professional poker player,
but I did spend a good 3 years (and am still doing so)
intensively studying the game of poker. I consider myself to be
a +EV cash game player (at least with my friends) and on the
online circuit before Black Friday.
I am "new" to trading and when I started trading, I did not
think about the cross applicability of the mindset of
professional poker players and how it relates to trading. After
intensively trading for 2 months, I start to realise the huge
similarities between the two, and how the psychology between the
2 are extremely cross applicable.
Short brief for those who do not play poker, poker (like
trading) is a game of incomplete information. You do not know
the cards in your opponent's hand, and neither do you know the
cards that will be dealt on the table and the actions that your
opponent will take as the hand progresses. This creates a
similar psychological challenge on the individual, similar to
that of trading. Both involve (potentially) high stakes and thus
this brings in all sorts of psychological complications that all
of us reading BMT will be familiar with.
Selection of starting hands
When I studied the game of poker, I learnt all about the
expectancy of starting hands and how you should be extremely
selective of the hands you play to achieve a positive expectancy
in the game.
Applicability to trading: The selection of starting hands in
poker is akin to the selection of your entry in the market. We
all have our own setups and we MUST wait patiently for our
setups to occur. The tricky part behind trading is HOW we
determine our setups. By virtue of the game, our setups differ
one trade to the next. This is why trades occur, everyone thinks
that they hold pocket AA whenever they enter the trade (if they
entered rationally).
Hence, once you have defined your setup in your trading rules,
do not deviate until you are comfortable with the markets. As it
applies in poker, the more competent you are in the game, the
more you can choose to open up your selection of hands. In
trading, the moment you reach a certain level of competence and
comfort, you should be able to also open up your selection of
trades by taking counter-trend, 2 tick scalps, etc type of
setups which novices should NEVER attempt to do so. But as
stated, this is purely subjective and it is not the entry
criteria that is in play, but the ability to MANAGE the trade as
you go on. 7-2 offsuit is never a profitable hand by any
stretch, but a professional poker player can read the action and
his players, and will be able to play that comfortably GIVEN the
correct situation etc. The playing of the hand is the SAME as
how you manage a trade.
"OMG! I shouldn't have folded 7-3o preflop. I hit trips!"
This is a common mistake of novice poker players, where they
whine about the loss of the opportunity to make a big pot when
they had totally no business playing an extremely -ev hand to
start with.
Applicability to trading: The exact same situation occurs in
trading, where the market does a crazy move in a singular
direction and you wonder "OMG! I should have got in before the
NFPs!". If the setup did not occur, just let it go. You would be
losing in the long run if you keep attempting to catch those
trades that are not part of your plan. This is very similar to
playing ALL hands in poker in order to catch the elusive trips
on the flop. You will get crushed. Same for trading. Attempting
to catch all ticks in the market = you will get crushed.
Fold when you are beat (or think you are)
When you know you are beat, or have a very slim chance of
winning, FOLD - and be happy about it. If the odds are stacked
against you, you may make a "hero" call sometimes, but in the
long run, you will get crushed.
Applicability to trading: Simple analogy - YOUR STOP LOSS. This
could also be a further element for the "scratch" for the more
experienced traders. Professional poker players do not wait till
the river to fold. They fold at any street if they find that the
EV in the hand has diminished significantly. Same for trading.
The moment you think the market is against your position and
even though it may reverse and hit your profit target, sometimes
its better to scratch and re-evaluate, or wait for the setup to
occur again.
Pocket AAs lose 15% of the time. Bad beats happen
The strongest hand in Hold'em, AA loses 15% of the time against
a random hand (can't remember the exact number, but it isnt
important). As a pro, we take it on the chin and do not let it
affect us in the next hand. Same when you flop a set or have
some huge made hand on the flop. You will lose occasionally.
That is the beauty of poker.
Applicability to trading: Quite an easy analogy. You can play
perfect poker - and still suffer losses in the hand or in the
session. I am sure you guys can see the analogy. Losses in
trading are perfectly normal and perhaps the reason why it is a
profitable endeavor if you master it. So take the loss and move
on to the next hand (trade). Do not let it affect your mood or
the next trade.
The hands will keep coming if you sit at the table
Unless you leave the table, or become broke, hands will keep on
being dealt to you. So do not rush it, and do not bust your
bankroll.
Applicability to trading: This one should be easy. Markets are
ever-present. Do not rush it. Play your hands (trades) as you
have planned, and nothing more. Protect your bankroll at all
times. The trade (hand) is insignificant to your bankroll, or
your stack size.
DO NOT TILT. If you tilt, stop playing and take a breather
Obvious relation to trading.
Never sit at a table where you do not have at least 50 buy-ins
in your account
When playing online poker, this was a rule for me. I had at
least 50 buy-ins in my account for whatever stake I played.
Applicability to trading: Your risk per trade! Very very
important.
The rake will murder your edge if it is too high
Every hand is raked by the casino. In some live cash games, the
rake is way too high to make it profitable for any player at the
table, or players may play too many hands that make their edge
diminish due to the rake they play.
Applicability to trading: Watch your commissions. This is
perhaps the least important out of all that I have stated, but
if you are with a broker that charges large per RT, this may
diminish your edge significantly. So sourcing for the most
reliable and cheapest broker may play a role in becoming
profitable, BUT it is probably the last thing on your list.
That's it folks. There are probably a lot more connection
between poker and trading. I write this with the assumption that
you do know how to play the game of poker and that you are a +EV
player that can comfortably play the game for profit. I hope
this short article can help players make the transition better
to the game of trading. I myself have had problems in trading,
where I keep wanting to take every tick of the market. This is
amazing considering the fact that when I play poker, I can sit
at the live table and fold hands continuously for 30 min without
wincing. I know that my game is +EV and my strategy works in the
long run. I hope that is the same for my trading (I know it is,
last I checked when I followed my rules, I have a good edge in
the markets).
Hence, for myself at least, I will attempt to play a mechanical
game of trading (for my entries), and only hone my skill in
trade management. I will end this before it becomes too much of
a journal. Hope this helps!
;D
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