Friday, July 9, 2010


I am of the belief that many parallels can be drawn between poker and trading/investing.

Poker and trading/investing hold many similarities.

Poker, like trading/investing, is a game of people. In both activities, one needs to get inside one's opponent or the masses' collective heads in order to be consistently winning. Importantly, in both venues, one has to know what makes your opponent or the market tick; what is the mood of your opponent or the psychological condition of investors who set share prices?

Neither activity can be gamed just mathematically or statistically. Many computer programmers have tried to game poker and the stock market but they have failed owing to the inability to understand the perception of the moment as judgment requires a human mind.

Here are some of the specific parallels I have observed.

Pay Attention...and It Will Pay You. Concentrate on everything when you are playing/trading. Watch and listen; remember to do both and relate the two.

Understand When to Play Aggressively...It's the Winning Way. Don't be a tight or a loose player/trader; be a solid one and recognize when it is time to press your bets/positions. To attain superior returns in poker and investing over the long run, grind it out (in stocks until you are up 30%-40%, and then if you have convictions, go for a 100% year). If you can avoid losing and put together a few 100% years, you can achieve outstanding long-term investment performance.

Tells: Look For Them and You Will Find Them. Poker players and stock markets have tells -- giveaway moves that are very revealing. Learn to recognize them. History is your textbook.

Be as Competitive as You Can Be. Go into a poker game and into a trade with the idea of completely destroying your opponent or scoring a major investment coup. If you win a pot or make a successful trade, nearly always play the next pot or make the next trade shortly thereafter -- within reason. Although the cards and trades might break even in the long run, rushes do happen and momentum often feeds upon itself. When you earn the right to be aggressive, you should be aggressive. When one has a tremendous conviction in a poker hand or trade, you have to go for the jugular.

Art and Science...It takes Both. Both activities are more art than science -- that's why they are so difficult to master. Knowing what to do is about 10% of the game. Knowing how to do it is the other 90%.

Money Management. The same sound principles of money control apply to the business of tournament/professional poker and to successful investing. The way to build long-term returns or poker winnings is through preservation of capital and home runs.

The Important Twins of Poker/Investing, Patience and Staying Power. Come to the poker table or to the markets with enough time to stay and play for a while.

Alertness is a Key. You must stay alert at all times.

Control Your Emotions. Allowing your confidence to be shaken can turn a simple losing streak into a terrible case of going bad. Keep your emotions in check. When you lose a pot or make a poor investment decision, get up, walk around the chair or take some deep breaths. Don't lose your poise. If a trade or poker hand does not work out, walk away from the position/hand. Be confident enough about your ability to win afterwards.

1 comment:

新順 said...