Trading and Poker: common features
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Many individuals pit trading against poker. Poker is considered to be gambling and trading to be an investment activity. However, we will see that trading and poker have a lot in common.
To succeed in trading and poker, it is essential to have strict risk management. With trading, risk management consists of not exceeding a certain percentage of risk on each trade and having overall portfolio risk management. The trader's objective is to make his capital grow but by controlling his risk, to avoid losing everything.
In poker, the objective is the same. It is a question of gradually raising the pot. A player does not go all in with each game, he places part of his pot on the hands he considers pertinent. His risk is often controlled, if he loses, the player is given the opportunity to return to the game.
With trading and poker, money is a working tool. It must be protected so that it can continue to work for as long as possible. Those who succeed in these two activities are those who, before thinking about winning, think about not losing.
Poker has a special case with ‘all in’. This consists in betting all your pot on one hand. In trading, this would mean risking all your capital through the use of significant leverage, which is prohibited. In poker, any player ends up at some point or other going all in, only they do not go all in on just any hand. Either the player has only a small pot left and has no choice but to go all in to get back into the game, or he tries a bluff (but the outcome is not only determined by chance), or the player feels he has the best hand.
With poker as with trading, the trading strategy is based on probability. A trader opens a position if he considers that his scenario has a high probability of coming to fruition (through the study of chart patterns, technical indicators, etc.). A trader therefore selects his trades.
A poker player bets, based on the odds of having the best possible hand compared to other players (by studying each player's profiles and the flop) or if he feels he has psychological influence (bluff). A player therefore selects which hands he plays.
If the odds of winning are low, the trader or poker player does not risk his money.
The difference comes from the fact that a poker player bets more if he feels that his chances of winning are high. He is willing to risk a greater part of his pot. However, a trader should not risk more on one position, because the outcome of his trade is always subject to an element of chance (it is the market that decides).
To succeed in trading or poker, it is essential to control your emotions. In trading, emotions are the number one cause of loss. Emotions drive people to make irrational decisions, to take profits too quickly, not to place a stop loss, to use massive leverage, etc.
It is the same with poker. If you are too emotional, you will succumb to euphoria after a winning hand, place a large bet out of greed, don't go to bed because of ego, etc., in short, make bad choices. Furthermore, in poker, emotions make you readable to other players! As they say, in poker you have to have a "poker face".
A good trader or a good poker player no longer feels excited or afraid. To avoid being influenced by emotions, you need to apply strict risk management and have a strategy you can trust. You follow your own rules to the letter.
To be good at trading and poker, you need to have good knowledge. In poker, you have to know the odds associated with each card combination to determine whether or not you should take part in the hand.
In trading, you must master the different elements of technical analysis (chart patterns, technical indicators, etc.). This is what enables you to determine accurate position entry and exit signals and to know whether or not a trade should be played.
Without solid knowledge, it is impossible to succeed in the long term. Of course, a stroke of luck can always happen (and that's why an amateur can beat a pro in a short period of time) but in the long term, only an experienced trader or player lasts.
For both poker and trading, it's all a question of approach. If you perceive these two activities as a gambling activity, you cannot win in the long term. Your success then depends mainly on luck, and the wheel of fortune is constantly turning. It's like going to a casino and betting on red or black.
However, if you perceive these as investment activities, if you consider your capital is a working tool, then in that case, you can hope to make money. This doesn't protect you from losses, any investment involves risk, but if you are good, you can make money.
Risk management
To succeed in trading and poker, it is essential to have strict risk management. With trading, risk management consists of not exceeding a certain percentage of risk on each trade and having overall portfolio risk management. The trader's objective is to make his capital grow but by controlling his risk, to avoid losing everything.
In poker, the objective is the same. It is a question of gradually raising the pot. A player does not go all in with each game, he places part of his pot on the hands he considers pertinent. His risk is often controlled, if he loses, the player is given the opportunity to return to the game.
With trading and poker, money is a working tool. It must be protected so that it can continue to work for as long as possible. Those who succeed in these two activities are those who, before thinking about winning, think about not losing.
Poker has a special case with ‘all in’. This consists in betting all your pot on one hand. In trading, this would mean risking all your capital through the use of significant leverage, which is prohibited. In poker, any player ends up at some point or other going all in, only they do not go all in on just any hand. Either the player has only a small pot left and has no choice but to go all in to get back into the game, or he tries a bluff (but the outcome is not only determined by chance), or the player feels he has the best hand.
Strategies
With poker as with trading, the trading strategy is based on probability. A trader opens a position if he considers that his scenario has a high probability of coming to fruition (through the study of chart patterns, technical indicators, etc.). A trader therefore selects his trades.
A poker player bets, based on the odds of having the best possible hand compared to other players (by studying each player's profiles and the flop) or if he feels he has psychological influence (bluff). A player therefore selects which hands he plays.
If the odds of winning are low, the trader or poker player does not risk his money.
The difference comes from the fact that a poker player bets more if he feels that his chances of winning are high. He is willing to risk a greater part of his pot. However, a trader should not risk more on one position, because the outcome of his trade is always subject to an element of chance (it is the market that decides).
Management of emotions
To succeed in trading or poker, it is essential to control your emotions. In trading, emotions are the number one cause of loss. Emotions drive people to make irrational decisions, to take profits too quickly, not to place a stop loss, to use massive leverage, etc.
It is the same with poker. If you are too emotional, you will succumb to euphoria after a winning hand, place a large bet out of greed, don't go to bed because of ego, etc., in short, make bad choices. Furthermore, in poker, emotions make you readable to other players! As they say, in poker you have to have a "poker face".
A good trader or a good poker player no longer feels excited or afraid. To avoid being influenced by emotions, you need to apply strict risk management and have a strategy you can trust. You follow your own rules to the letter.
Knowledge
To be good at trading and poker, you need to have good knowledge. In poker, you have to know the odds associated with each card combination to determine whether or not you should take part in the hand.
In trading, you must master the different elements of technical analysis (chart patterns, technical indicators, etc.). This is what enables you to determine accurate position entry and exit signals and to know whether or not a trade should be played.
Without solid knowledge, it is impossible to succeed in the long term. Of course, a stroke of luck can always happen (and that's why an amateur can beat a pro in a short period of time) but in the long term, only an experienced trader or player lasts.
Conclusion
For both poker and trading, it's all a question of approach. If you perceive these two activities as a gambling activity, you cannot win in the long term. Your success then depends mainly on luck, and the wheel of fortune is constantly turning. It's like going to a casino and betting on red or black.
However, if you perceive these as investment activities, if you consider your capital is a working tool, then in that case, you can hope to make money. This doesn't protect you from losses, any investment involves risk, but if you are good, you can make money.
