Zen and The Art of Trading

Larry,

Thanks for participating in this forum.

In trading, I find it different than poker. Due to Money Managers (MM) with huge sums of money, playing Other People's Money (OPM).

If I'm getting paid to play OPM, my psychology is completely different like averaging down, chasing stocks up, etc.

Can you share your thoughts on this topic. Imagine if poker is like stock market, big money is OPM. What will happen to little folks sitting across a MM who has huge roll of OPM, continues to bet until other guy runs out of money.

Thanks again.
 
Hi et user--
I'm not so sure there are great dissimilarities. First, remember, the best poker players are definitely playing with OPM. They tend to sit down at a game with $1,000 and within not too long a span of time have $2000 sitting in front of them. So on a basic level, they ARE playing with OPM, and fully intend to be doing so.
It reminds me of a conversation I overheard one time. A woman I know asked a friend of mine what he did for a living. He said he played poker. She said,
"Where do you get the money to do that?"
He shrugged and answered:
"From the other players."
Secondly, the exact same "shake out" of the little guy occurs in poker as happens in the market. Get into one of the online poker sites some time and watch a pot limit poker game and observe what happens to the small guy-- the guy who comes to the table with $50, say, while the other players in the game have $2600 sitting in front of them, or $4200. Just watch what happens to this guy. When I see this guy arrive at the table, I know 100% what's going to happen. He's going to get run over. Oh sure, on rare occasions he can "get lucky", the deck can "hit him in the head" and he can win 4 hands in a row on miracle cards, end up happily with $175 or something and leave the game, quit playing forever and beat the game that way. (Which he better do, because that's the only way he's going to win.) Similarly, I could make one stock trade, get lucky, then quit forever and announce myself as a "winner". Same thing. Big money talks-- and it really talks-- in poker, too. It talks in the following way:
You bet $50 into me in a poker game. I raise you $600. You get a worried look and mull things over for a few minutes and shake your head, then you say: "I re-raise you $20,000." Then I fold, and you end up with my $600. This is what the big boys do in poker.
So money is the big gorilla in the market, the same way as in poker, to my way of thinking-- probably much the same way.
I'm not sure if this answers your question because I'm not exactly sure of the nature of the psychology used in trading OPM. But I'm not so sure that they're far apart.
Best,
Larry Phillips
 
Larry,

Thanks for joining the thread.. Have some poker questions for you.

Do you find professional poker players are streaky?? what I mean is .. have runs where they can not win consistently for a period of time no matter how good they are???

I think I am a pretty decent poker player but have runs where I just can not do anything.. Always getting sucked out on and so forth.. of course this has been playing on the internet which seems to be more apt to busting players on the river..

Also, I find I make the same mistakes in poker that I do in trading:

Impatience - playing hands due to boredom

When ahead more apt to play mediocre hands.

Not folding when I know I am beat..

Going on tilt after a string of losses or a bad beat..

Bassically losing my discipline and I suffer with the same problems in trading...
 
Do you find professional poker players are streaky?? what I mean is .. have runs where they can not win consistently for a period of time no matter how good they are???

Oh, absolutely. Very streaky.

I think I am a pretty decent poker player but have runs where I just can not do anything.. Always getting sucked out on and so forth.. of course this has been playing on the internet which seems to be more apt to busting players on the river..

This is a continuing controversy, as you know. I've played on it a lot and I have to say I'm not seeing it. (All the same weird stuff happens in real games-- albeit at a slower pace). The fact is, you're going to have terrible times, breath-takingly bad runs of luck, but if you are playing correctly, that fact should begin to predominate over time. I was playing one year, I remember, a couple years ago, and I was up about $12,000, something like that, and then I went into this $3000 downswing that was so odd, so statistically improbable as to be almost impossible. I must have gotten beat on the river (or missed the flop with excellent hands), hundreds and hundreds of times in a row. Yet overall, I was up, you know, so I have to factor that in too. It was spooky though, when it was occuring, as you know.

Also, I find I make the same mistakes in poker that I do in trading:

Impatience - playing hands due to boredom

Ah. Been there.

When ahead more apt to play mediocre hands.

Yup.

Not folding when I know I am beat..

Going on tilt after a string of losses or a bad beat..

Bassically losing my discipline and I suffer with the same problems in trading...

Someone asked (above) how to "internalize" these rules so we don't do this sort of thing. My answer, sort of indrectly employed in the Zen book, is basically breaking down the logic you're using. For instance, if you view "inaction" as a weapon you are using, then you're changing the logic of it in your head, and are thus "installing" the rule in yourself in a new way, and internalizing it.
How many times in poker (or trading) have you been losing, getting beat up-- were angry about it, verxed, irritated, and so on-- then something good happened around the next corner that was big-- more than offset it? We have to look at the big picture, try to keep the hemoraging as low as possible during the valleys, because the better times WILL be coming and we don't want to dig ourselves a hole during the bad times.
Thinking of this in this way is, again, breaking down the logic, and this helps us internalize this stuff, because we're seeing it in a new way.
So I think that's the answer.
But it's certainly true, that the weak link is us--we have seen the enemy and he is us.

Best,
Larry Phillips
 
Quote from Larry Phillips:


Someone asked (above) how to "internalize" these rules so we don't do this sort of thing. My answer, sort of indrectly employed in the Zen book, is basically breaking down the logic you're using. For instance, if you view "inaction" as a weapon you are using, then you're changing the logic of it in your head, and are thus "installing" the rule in yourself in a new way, and internalizing it.
More...

Hi Larry,

Do you mean to create a metaphor to anchor your mental energy? Thanks.
 
Quote from Larry Phillips:

But it's certainly true, that the weak link is us--we have seen the enemy and he is us.
More...
This statement could not be more true.. the sad part is it applies to many aspects of life and people don't realize it. They want to blame their misfortunes on everything or everyone else.

I am at a point in my life where I realize I am where I am at because of myself and noone else is to blame but me..
 
I WROTE:
Someone asked (above) how to "internalize" these rules so we don't do this sort of thing. My answer, sort of indrectly employed in the Zen book, is basically breaking down the logic you're using. For instance, if you view "inaction" as a weapon you are using, then you're changing the logic of it in your head, and are thus "installing" the rule in yourself in a new way, and internalizing it.

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



YOU WROTE:
Do you mean to create a metaphor to anchor your mental energy?


Not a metaphor so much as breaking down the logic of it, re-framing it. You go beserk after a bad night of poker, or series of bad trades, let's say, then you need a new way to think about it. I'm referring to thinking it through, breaking down the logic, all the steps that occurred, and re-wiring your brain so you are thinking about it differently. I think this is the way you internalize it. (Choose somebody else as an example of why this behavior is self-defeating and goes against their own interests and can only lead to more losses.)
An example (from poker) would be the idea that you "play by the year, not by the individual session". In other words, things go up and down on a short-term basis, but you measure yourself over a longer time-span. Now this is a different way of thinking about it, and by extension, a way of internalizing it so that it becomes a part of you.


I should say one other thing here: the first thing to know is that you are doing everything right. You can be the most calm, serene poker player (or trader) on earth, and the bad times have no effect on you whatsoever, but what does this gain you if you are trading wrong (or playing poker wrong)? You will continue (serenely) losing. So this needs to be verified.

Best,
Larry Phillips






__________________
Honesty is the key.
 
Quote from Flashboy:

This statement could not be more true.. the sad part is it applies to many aspects of life and people don't realize it. They want to blame their misfortunes on everything or everyone else.

A lot of situations have been worked out over the years, through trial and error, so all other aspects of it work well and smoothly. This leaves "operator error" as one of the few remaining things. Like driving a car--one of the things most likely to blow out is us.

I am at a point in my life where I realize I am where I am at because of myself and noone else is to blame but me..
More...

I did a book on Ernest Hemingway once. He said:
"If you're good enough, everything is your fault."

Larry Phillips
 
Quote from Larry Phillips:

Do you find professional poker players are streaky?? what I mean is .. have runs where they can not win consistently for a period of time no matter how good they are???

Oh, absolutely. Very streaky.

I think I am a pretty decent poker player but have runs where I just can not do anything.. Always getting sucked out on and so forth.. of course this has been playing on the internet which seems to be more apt to busting players on the river..

This is a continuing controversy, as you know. I've played on it a lot and I have to say I'm not seeing it. (All the same weird stuff happens in real games-- albeit at a slower pace). The fact is, you're going to have terrible times, breath-takingly bad runs of luck, but if you are playing correctly, that fact should begin to predominate over time. I was playing one year, I remember, a couple years ago, and I was up about $12,000, something like that, and then I went into this $3000 downswing that was so odd, so statistically improbable as to be almost impossible. I must have gotten beat on the river (or missed the flop with excellent hands), hundreds and hundreds of times in a row. Yet overall, I was up, you know, so I have to factor that in too. It was spooky though, when it was occuring, as you know.

Also, I find I make the same mistakes in poker that I do in trading:

Impatience - playing hands due to boredom

Ah. Been there.

When ahead more apt to play mediocre hands.

Yup.

Not folding when I know I am beat..

Going on tilt after a string of losses or a bad beat..

Bassically losing my discipline and I suffer with the same problems in trading...

Someone asked (above) how to "internalize" these rules so we don't do this sort of thing. My answer, sort of indrectly employed in the Zen book, is basically breaking down the logic you're using. For instance, if you view "inaction" as a weapon you are using, then you're changing the logic of it in your head, and are thus "installing" the rule in yourself in a new way, and internalizing it.
How many times in poker (or trading) have you been losing, getting beat up-- were angry about it, verxed, irritated, and so on-- then something good happened around the next corner that was big-- more than offset it? We have to look at the big picture, try to keep the hemoraging as low as possible during the valleys, because the better times WILL be coming and we don't want to dig ourselves a hole during the bad times.
Thinking of this in this way is, again, breaking down the logic, and this helps us internalize this stuff, because we're seeing it in a new way.
So I think that's the answer.
But it's certainly true, that the weak link is us--we have seen the enemy and he is us.

Best,
Larry Phillips
More...

LP.... you have contributed some good insight on this thread (as have others).

I... for one, apreciate it bro!!

Have a good New Year guys!

IcE
:cool:
 
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