Graham

Poker & Trading

Lessons from a top trader: similarities and differences between poker and trading
I’ve done very well trading stocks over the years. I’ve also done well playing both online & live poker and have discovered many similarities between the two that I’d like to share with you.

Similarities

1.Money Management
2.Risk / Reward
3.Discipline
4.Confidence & knowing you have control will aid in success
5.Successful traders/poker players log and analyze past hands/trades and probabilities
6.Use bankroll as a tool
7.Use programs, websites, and mentors to constantly improve
8.Both individuals have certain level of gamble in them
9.You are a sole proprietorship
10.Need a plan and you must set goals
11.Learn to adjust to different stock markets, different poker players, and stakes
12.Skill is most important but there is always an element of luck
13.Don’t go all in with your entire bankroll, live to fight another day!
14.Trade/Play according to your bankroll size
15.Great traders and poker players think ahead of each move similar to chess players
16.Continuously making decisions that will affect your profit/loss
17.Know when to stop playing or trading for the day
18.Can yield high levels of return on equity or buy-in
19.Unlike a job, can leave at the end of the dy with less than you started
20.Can’t win every trade/hand but can still be profitable
21.Both can create great 2nd incomes and have created millionaires of those that seriously learn techniques and strategies
22.Emotions play a big factor (don’t over trade/go on tilt)
23.Outside influences (quarrels, family problems, pressure) will affect your trading or poker play
24.When unsure, or on a losing streak, trade or play in smaller amounts
25.In poker, the house is the casino, taking small amounts (rake/session) from all players. In trading, the house is the brokerage firm which takes small fees (commissions) from all traders
26.Don’t chase your losses, concentrate on the next best decision
27.Bad beats and losing trades happen, but learn from them and move on
28.Trading allows you to use leverage with margin, while skillful poker players have been know to get staked (lent cash by investors for a % of profits or tournament wins)
29.Successful poker players and traders know how to maximize wins and minimize losses
30.If your bankroll is your rent money, then you will have a difficult time at success
31.Age, sex, and race are not boundaries for success

Differences

1.Can’t bluff in trading
2.Can’t consult during live poker but can while trading by asking other traders for advice
3.Can’t hedge poker positions like you can trading with options
4.Great poker players are well known while great traders can be your next door neighbor
5.Less time is required in trading (especially for swing trades), so don’t always have to be at computer watching open positions
6.Highest level of poker is limited to few individuals while trading on the other hand has some traders and hedge funds making hundreds of millions of dollars, which hasn’t occurred yet in poker

stockguy22

__________________
Think big, think positive, never show any sign of weakness. Always go for the throat. Buy low, sell high. Fear? That's the other guy's problem.
Nothing you have ever experienced will prepare you for the absolute carnage you are about to witness.

mattman

very nice analysis. The only thing I can think of to add here is game theory, in poker you base a lot of your moves based on how you think the other person will react, in trading keep an eye on the big institutions and banks (are they spreading bad rumors about a company with the intention of going long at a better average price, or is there truly a flaw with the company)?