Trading vs Playing poker, will it help with my trading?

Quote from IntelligentComp:

Interesting thread. :) Does it mean that traders know poker and poker players know trading? Do I need to learn poker to be a good trader?
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Please see the following links, they may help you:
http://www.traderslaboratory.com/forums/f43/applying-poker-strategies-trading-markets-631.html
http://traderfeed.blogspot.com/2007/04/what-we-can-learn-from-trading-and.html
http://www.traineetrader.com/ten-lessons-i-have-learned-about-trading-from-poker/
http://www.chrisperruna.com/2010/07/13/trading-and-poker/
http://www.forexfactory.com/showthread.php?t=232843
http://articles.latimes.com/2010/may/16/business/la-fi-poker-traders-20100516
http://www.trade2win.com/boards/general-trading-chat/32255-trading-poker-parallels.html
http://www.nj.com/business/index.ssf/2010/05/parallels_of_poker_to_stock_tr.html
http://stockguy22.com/2010/11/08/poker-and-trading-strategies-similarities-and-differences/
 
Traders who consider the impact of their poker experience have the most difficult time... they somehow believe there is some correlation.

There isn't.

Now if you want to talk similarities between trading and card counting in black jack, that's different.
 
i wouldn't try to associate poker with trading....especially if you are trying to improve your trading thru poker. I am a believer in that good traders are good poker players....generally speaking, but the other way around isn't true....
 
Once again... it gets back to Money Management, how you exit (or fold)

Even professional poker players know the similarities: http://www.youtube.com/watch?v=qcPD9AmVdl0

Once again... it gets back to Money Management

Don’t believe me listen to Johnny Chan http://www.youtube.com/watch?v=11CmDAJhiNg

Johnny Chan is one of the best poker players in the world. He says: “I play SOLID and TIGHT”, that means he does not make stupid loose bets and always honor your stop-losses) he manages his bankroll just like a trader).

What more PROOF do people need???

People make trading far more complicated than it needs to be. In fact, I was talking with a trader this morning about Money management and he said: ""It's the one thing that separates the losers from the winners".

Whenever you come across something that I think adds value to your life or the trading world… You should share it with others who want to learn. So, pay close attention the words of wisdom below.

This mentor/trader spent 40 years of his life learning what it took to be a profitable trader and he’s going to sum it up in exactly 7 paragraphs.

Here it is…

I have been a profitable trader for over forty years. I buy what’s going up and I sell short what’s going down… I’ve made a lot of money doing that…

There is no secret to the markets. You put your trade on and if it starts to lose money you get out and look for another trade. If it starts to make money you let it run and perhaps add to it. You do this every day that you want to trade.

You will lose on 4 or maybe 5 or even 6 trades. The 4 winners pay for all the losers and provide a profit. Sometimes the profit is very large and sometimes it is not. I can’t control the markets. I don’t know what they are going to do. I don’t believe anyone does. Therefore, I concentrate all my attention on controlling me.

As long as I know what I am going to do, the market can’t hurt me. That’s all there is to it. Cut losses, cut losses, cut losses. The real skill of trading is refusing to lose money (NOT HOW MANY TRADES YOU LOSE ON). The profitable trades take care of themselves. All traders have losing trades and winning trades. The key is to let the winning trades RUN and cut the losing trades at the stop loss point. Know where you are going to be stopped out of a trader before you enter the trade.

It’s how you manage those trades that makes the difference. When I put a trade on, I don’t know what’s going to happen to it. But I do know how much I’m willing to lose to find out and once that point is hit… I’m out. Go on to the next trade. If you don’t bet you can’t win. If you lose all your chips you can’t bet. That’s it.

I’m a professional trader. It’s what I do. I’m not a trading teacher, I think the best way to learn trading is to open an account and trade. I usually don’t even talk about trading to people because I can’t make them understand. Most people are trying to be right on 8 out of 10 trades or even 9 out of 10 trades, but ask yourself: “How come all of these high percentage winning traders never make any money?” Here’s the secret: They never let their profits RUN… they always get out too early on their winning trades.

The market provides endless opportunities to make or lose money. Huge opportunities. But you have to figure out how to get it to pay you. Believe me. It will pay you if you get on the right side of the net order flow 4 or 5 times out of ten and you don’t lose too much when you’re on the wrong side of it… That’s the secret to the trading business. You can use whatever method you want to get into a trade, but what you do after the entry point is what makes you a winner or a loser.

And with that he said: "Now stop screwing around trying to find the perfect indicator and go make some money" with a big :-)

Now you just read the summary of 40 years of profitable trading. What 4 keys did you learn from that traders experience?

1. Trade with the trend

2 Cut losses short

3. Let profits run

4. Manage Risk

Here’s another key concept for traders and one of the best pieces of trading wisdom I can give you

It doesn’t matter how often you are right or wrong – it only matters how much you make when you are right, versus how much you lose when you are wrong… that’s the whole key to trading or Poker.

Trading is really nothing more than a simple 4 stage process:

1. Identify your trade setup

2. Assess your risk to reward

3. Determine your position size

4. Control the exit and stop strategy

Remember, the entry of your system is only responsible for about 10% of your success... Why do you think most of the poker POT is build after the FLOP? You don't see the money going ALL-in "pre-flop" all the time do you? Think about it for a minute...

Van Tharp was being interviewed once and said the following:

The question:
"Traders like to feel like they are in control, so how do traders get control?"

Van:
People get to control by getting into to a trade. They might say: I'm not getting in until the market does X,Y and Z, but this has nothing to do with making money.

The question:
"What does it have to do with then"

Van:
Making money has to do with cutting your losses short and letting your profits run - and guess what? That's all about EXITS not entries. So, if you combine the two most common biases for traders - wanting to be right and needing control... what you really have is a recipe for disaster for the average trader.
 
Warren Buffet has more in common with poker players than you think: http://www.youtube.com/watch?v=RkURIgfomxo

Hedge Funds even know this: http://www.youtube.com/watch?v=h6fidaZDPZY&feature=related

Trading firms put their money on poker experts: http://articles.latimes.com/2010/may/16/business/la-fi-poker-traders-20100516

Ex-Trader and now winner of the 2000 World Series of Poker winner explains bankroll:
http://academy.fulltiltpoker.com/lessons/video/52/bankroll-management

Most important of all, is that the similarity between poker and trading is in the number of hands (trades) one needs to make in order to succeed. The percentages of hands (trades) that are not played (entered) or folded (lost) are quite large compared to the successful ones. Equally important is that the losers must remain small and the winners must be big in order to succeed. Smart poker players know how to control their risk and don’t bet their entire stack of chips unless they have the “nuts” (a great hand) to back it up. More often, they keep their bets rational. I would rather have 30 small trades, limiting my risk to 2-3% of my account, than to have 10, risking 5% of my money. This is how poker players succeed, although they occasionally go “all-in.” They understand that any individual hand (trade) is not going to make them or break them, thus they are more decisive about folding (closing) a hand (trade) before their losses mount.

Here is something I'll bet you don't know:

The CEO of Full-Tilt Poker is a trader and he ran the trading office for Bright Trading a few years ago... Don Bright tells the story:

REAL WORLD

Gaming Theory

Trading And Poker Parallels

Risk? Yes. Reward? Of course. But the similarities go deeper.

by Don Bright with Darren Clifford

A couple of months ago, I was asked about the similarities between stock trading and what seems to be the new national pastime, poker. Las Vegas is home to some of the world’s best poker players, and Bright Trading is headquartered in Las Vegas. It just so happens that some of the world’s best poker players are also Bright traders. My brother, Bob, made his first fortune playing blackjack back in the 1970s. He took that money and bought a seat on an exchange to start trading options in 1978. Over the last couple of decades, we have always played poker at our family Christmas gatherings (everyone should have a family tradition, right?).

Now, for several years we have had a trader named Chris “Jesus” Ferguson in our organization, and I always thought it was neat to have a younger guy with an interesting appearance as part of our team.

HTTP://WWW.FULLTILTPOKER.COM/CHRIS-FERGUSON

To prove that you can’t judge a book by its cover, Ferguson has a doctorate in computer sciences. Ray Bitar, our Los Angeles office manager for many years, teamed up with Ferguson and several top poker players to form a new business venture, Full Tilt Poker. Bitar is now the CEO (OF TILTWARE LLC.) of what has become one of the most popular online poker sites among serious players.

These business and personal friendships have allowed me to look inside the world of professional poker. My brother and I actually sponsored a poker tournament in Anaheim, CA, in 2005, and asked the players who are also traders to share their thoughts about the similarities between the two activities. Here is a listing of some of the basic correlations:

Trading Poker
Discipline Discipline
Money management Money management
Risk/reward Risk/reward
Edge Pot odds
Timing Timing/seat placement
Loose trades Loose play
Bluffing Bluffing
Emotions Emotions/tilt
Hedge Partners
Patience Patience
Tape-reading Read the players
Conceal position Conceal strength or
weakness of hand
Market on close imbalance Last player (button)
Size of order Size of bet
Knowing “players” Knowing players

Both professions can be performed from virtually anywhere on the planet (and even “virtually”). Success in either field provides a great feeling of independence, and of course, the financial rewards for both can be great. Let’s explore a few more points:

1 Tilt. Emotions do not dictate the cards or the price of a stock, but they do affect how we react to them. Being able to stay away from emotions and only play or trade probabilities leads to success in both trading and poker.

2 Number of outs. The more ways you have to make a hand, the greater your probability of successes. In trading, the more ways you have to hedge a trade, the more outs you have, and the greater your chances of success.

3 Table talk. Institutions are always upgrading, downgrading, and making comments about stocks that they own! Table talk does not change the cards at the table, or the ability of a company to make money. Institutions and players use table talk for deception.

4 Capital management. Managing your capital in poker is as important as playing your cards. In trading, not only do you have to manage how much of your capital you will risk on each trade, but also how much capital you will leverage to increase your edge.

5 Varying your bets. One of the most powerful tools in any game is the ability to change your bet when you have an edge. This is true for blackjack, poker, and trading. You don’t start a new strategy with 5,000 shares; you work up to bigger trade size.

6 Betting for information. In poker, a small bet is sometimes used to gain information about your opponent’s hand. In trading, you may use a small trade to gain information about the presence of buyers or sellers. With both games, using that information is key to your eventual success.

7 Pot odds. If the amount of money a player expects to win is worth the risk, poker players will be in pots that they have less than a 50% chance of winning. Similarly, traders will take trades that have a small probability of being successful on the grounds that they will gain a large amount if they are right.

8 Know your opponent. Traders will watch how a stock prints a buyer or a seller the same way a poker player will watch the betting strategies of their opponent.

9 Play online. With the rising popularity of the Internet, you can always find a game of poker, or trade from anywhere in the world.

10 Discipline and patience. Both trading and poker are games of discipline and patience: knowing how and when to play, and then executing to the best of your abilities. For those who excel at one game, there is a good probability you will also excel in the other.

Of these points, one of the most important things to remember about both trading and poker is that you must enjoy what you’re doing, do it well, and have some fun while you’re at it!

Don Bright is a principal of Bright Trading, an equity trading corporation. He may be reached at don@stocktrading.com.

---------------------

I Thought you might like watching this one as well...

http://academy.fulltiltpoker.com/lessons/video/52/bankroll-management
 
playing poker and trading are the samething. A professional poker players found his edge buy reading losers minds (bluffing) and win against them constantly and consistence. They establish their poker playing rules by playing along side with the losers, no drinking, wear sunglasses (if need to), listen to music on ipod, etc etc etc.

That is no difference than trading when a trader found his/her edge and trade consistence and constantly.
 
Having played a ton of live poker, I found it hard to concentrate on both trading and poker. You can do both of course, but you cannot do both with the same vigor. At least I couldn't. I never played online poker, only live, so it entailed driving a non-trivial distance to the card room and a lot of late, late nights. Wears you down physically. Also, variance in poker is considerable higher, esp. NL. Now I enjoy poker, but play it casually and much less frequently than I used to.
 
Here’s something I bet you didn’t know... the CEO of FULL TILT online poker is a trader! Click on the link below:

Similarities of Poker and Trading: http://www.stocktrading.com/Pokerarticle2006.htm

Warren Buffet has more in common with poker players than you think: http://www.youtube.com/watch?v=RkURIgfomxo

Hedge Funds even know this: http://www.youtube.com/watch?v=h6fidaZDPZY&feature=related

Trading firms put their money on poker experts: http://articles.latimes.com/2010/may/16/business/la-fi-poker-traders-20100516

Ex-Trader and now winner of the 2000 World Series of Poker winner explains bankroll:
http://academy.fulltiltpoker.com/lessons/video/52/bankroll-management

The bottom line is that the similarity between poker and trading is in the number of hands (trades) one needs to make in order to succeed.

The percentages of hands (trades) that are not played (entered) or folded (lost) are quite large compared to the successful ones.

Equally important is that the losers must remain small and the winners must be big in order to succeed. (High R-Multiples)
http://www.youtube.com/watch?v=JFuF6M7z1jg

Smart poker players know how to control their risk and don’t bet their entire stack of chips unless they have the “nuts” (a great hand) to back it up. More often, they keep their bets rational. I would rather have 30 small trades, limiting my risk to 2-3% of my account, than to have 10, risking 5% of my money. This is how poker players succeed, although they occasionally go “all-in.” They understand that any individual hand (trade) is not going to make them or break them, thus they are more decisive about folding (closing) a hand (trade) before their losses mount.
 
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