Darvas, O'Neil style value investing vs. int. article about poker as a zero sum game

bankroll

bankroll

(First of all, sorry for not replying for my other topics - the search function is not working sitewise)

This in again one of those topics exploring the similarities and differences in poker and trading.

Here is the post on poker (just click Close & Read Quora) as a zeo sum game:

http://www.quora.com/Investing/Why-...o-great-card-players/answer/Andrei-Kolodovski

Vs. the post on how value investing is not zero sum, it adds to society:

https://mises.org/daily/2381
For the comments, go here: http://archive.mises.org/5924/the-social-function-of-stock-speculators/

Personal disclaimer: I was never really a poker person (but more like Darvas). Nor did I hear Darvas was a poker person. I understand for some kind of trading

> How about this? Private Equity Destroys the Economy - https://www.youtube.com/watch?v=WbgHy8FoRq0)

the poker analogy of zero sum game is appropriate.

Now if I am more (or only) interested in Darvas/O'Neil style trading/value investing, should I care about learning poker? Or is it only a waste of time. I mean, sure, not a waste of time (as with any worthwhile endeavor), but time invested in learning a totally different skill set unrelated to my real goals?
 
bankroll said:
Now if I am more (or only) interested in Darvas/O'Neil style trading/value investing, should I care about learning poker? Or is it only a waste of time. I mean, sure, not a waste of time (as with any worthwhile endeavor), but time invested in learning a totally different skill set unrelated to my real goals?
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Depends on what you want to get out of it. Since poker is a zero-sum game and trading is not, that particular analogy is not going to get you very far in terms of technique. However, there is a mindset that is arguably essential for the trader and also for the professional gambler, particularly with regard to poker. This is probably why poker is so often mentioned on trading forums.

I suggest you look at the first few posts in the following thread in order to determine whether or not this is what you're looking for:

http://www.elitetrader.com/vb/showthread.php?t=38333

For some reason it is not on the "hall of fame" list, and it's impossible to find if you don't already know it's there. But for those who seek the path to "the next level", it may be just what they're looking for.

Phillips' book is on my Recommended Reading List.
 
Curse you for bringing this subject up. I wound up getting sucked into the thread again and finally had to wrench myself away around post 180. :)

It's a life-changing thread. Or can be.
 
I prefer O'Neil's style.

as for poke, I think you should learn two things from Poke.

first, about control. you always need put yourself in a situation: you can attack, also you can yield. each step forward is totally under your control. you are not in a passive situation: forced to take a position, or forced to get out. I play a poke game with my 7yr son, this game is very simple. first, we get five cards from the deck through rotational picking. then we throw a coin, head up: you deal; head down: opponent deal. that is the start. after that, next deal is decided who won in previous deal.
you can show a deal by a simple card, or a twin /triple /quple(the same number), a serial card (at least three cards). then opponent need show cards with bigger numbers to win, if opponent dont have any matching deal bigger than that. the winner puts aside all those shown cards, then pick enough cards from the deck to fullfify full hand (5cards). after the winner got his full card, he can make deal again, and on and on. until one moment, the deck is empty. who shows the most deals(most cards) who win. in this simple, the control is very critical. my 7yrs son quickly learned that he first needs show "small odd deal" first, if in first round, he got a King, if I showed a single card, he immediately use his killer card King to get the control, then after he picked more cards from the remaining deck, he knows his chance to win increase dramaticlly in probability, he will easily get "twin,triple,quple" or a serial cards, while all those in opponent hands are small odds.

Trading in the first place is about control. you do not want to lose first, then fight back. you need a strategy (no matter whatever) to win first, each step you take should be considered as WHO WANTS TO BE MILLINAIRE TV SHOW. You do not want to lose control. You donot want to be in a situation: I MUST STOP LOSING. That means your odd toward success is dimmer, you are forced to do something which is not certain. Donot think each step individually. Poke /chess is odd's game just like trading. Some poke players in the Dice roll first stage, they have inside information (that is their secret, they use peeking technique such as hand signal/coded gesture/ encrpted enviroments etc.,just like a magician did, distracting your attention). So that is why the house magically wins. after each step, the house's winning odd gets bigger and bigger, while yours are smaller and smaller. Another effect is psycholical deafeat. in this way, evenyour opponent cheats, you still thinks house has edge.

Second, odd, or probability. Poke is totally an odd game. who knows next card, or who knows what cards you get. if you pick a card from a full 54cards deck and hit a parcular number. the odd is 1/54. how about pick 12cards, what is the odd of this pickings? there are totally C1/54*C1/53*C1/52*.....C1/42 pickings. I wrote a small recursive program to compute it, it is 6900635638337785000000. wow, the odd is just invese of it, almost zero! normally four players, so this number is not the correct one. but that tells how small you odd to get a desirable picking serial!

In trading, odd is not so small. there is three kinds of bars, green, red, green/red between. if you open a trade in the 9:30AM opening, and end it at 4:00PM. then your odd of winning is 0.333.. if you plan to do two trades in 2 days. the possible results could be 3*3, or nine results. if you plan to do three trades in 3 days. the possible results could be 3*3*3, or 27 results. the more you do, the more dramatically decreased odd for an expected results. if you want to win 3 sessions in a row, the probability is just 1/27, i.e.0.037, one 10th of just one trade. what that tells you?

go back to Control. Control means increase odd after each play. one way to do that is: store those played cards in your memory, also the orders, so in next round, they are not in the caculation list, the set size of unknowns are smaller. I always count and monitor those signs of opponent's activities, what they unloaded and loaded, professional lottery buyers count!
 
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