In 2018, Bridgewater Associates, an American investment management firm, hired a new consultant — Vanessa Selbst, a three-time World Series of Poker winner. That wasn’t the first time that hedge funds took advantage of poker players, especially aggressive ones like Selbst. So why do fat cats think that they can entrust their money to gamblers? Let’s see why such a career change can make more sense than meets the eye.
We need to get one thing clear right away. You are unlikely to add points to your financial attractiveness if you use the words “poker” and “trading” in every sentence and breath. The general public often associates poker with an unreasonable risk. However, examples such as the one with Selbst show that there are some parallels, and if you carefully select healthy key strategies from there, you may as well enrich your trader’s toolbox.
Five good tactics of seasoned traders and players
1. Know when to hold ‘em; know when to fold ‘em
A good poker player folds a lot of hands. Yes, it’s boring, yes, it’s not as dramatic as in the movies, but that’s how poker players make money. In real-life poker, the essence of success is making money, not cool-looking winning hands. And most hands — surprise, surprise! — are losing hands, so it takes a lot of patience and control to preserve your bankroll while waiting for a good hand.
When a hand is dealt, we can play it if we consider that the combination is strong enough, or we can choose to fold and wait for the next hand. Similarly, good setups in trading don’t come up as often as we would like them to. So we face basically the same choice: take a trade or wait for the next one that might better fit our criteria and management rules.
2. Don’t go the “tilt”
There is one quality that unites amateur traders and amateur poker players — they are prune t fall into an emotional rollercoaster.
Players who let their emotions take over begin to lose chips at that very moment. This is when they enter the state of mind that is called “going the tilt”. They take reckless decisions and make high stakes with irrational motivation.
Amateur traders also tend to act on impulse and trust their “intuition”, which is not based on anything, or to make deals out of fear or greed, for example, after they’ve encountered a losing streak or a winning streak. And it does not lead to any good — such traders often take a series of losses and lose big portions of their portfolio. What’s even more dangerous, they may enter a mindset of “revenge trading” — a state when a trader tries to win back losses by initiating a larger — and often riskier — trade. Not recommended.
3. Be prepared to lose (and to learn from your losses)
No matter how good we are at analyzing our opponents’ next moves, no matter how fast we calculate, we will lose in poker. It’s inevitable, and we have to be prepared for it. World’s best poker players fold 90% of their starting hands. Some professional players can go for weeks or even months without winning, and therefore without earning, waiting for a hand with a high probability of success. But it is important to understand that they do not just sit idly with cards in their hands. Good players are always learning — to calculate the risk per move, to stake the right amount of money per hand, and so on. Thus, they are able to develop various game plans for different situations and succeed in the long run.
This kind of approach is also valid for trading. Wrong choices are inevitable, money losses are inevitable, but if we learn from every mistake, even failures can be turned to our own good. Loses will help you get to know the market better, point out your weaknesses as a trader, help you develop your own methods of risk management, and finally, help you build the frame of mind you must have to succeed.
4. Venture the unknown
Incomplete information is usually the basis of players’ decisions — unless they cheat, of course. They decide whether to bet, call, raise, or fold without knowing how their opponents’ hands look like.
Trading also requires action under conditions of incomplete information. The market situation and prices may be affected by literally all the events that are happening around us. We can try and analyze this influence, but, in the end, the outcomes are simply unknowable. With imperfect information, the key to success in poker and trading is to estimate what is most likely to happen and draw decisions on the most probable outcome.
5. Don’t forget the math
This is not the simplest area, but there are a lot of useful tools there. They mainly relate to probability theory as well as the analysis of correlated macroeconomic factors. In Forex trading, these tools are widely computerized, but a poker player should learn to sum in their head and apply different algorithms and strategies of analysis and risk control.
With poker, any kind of automation is prohibited, although some online versions of the game allow software like a calculator. In any case, the ability to do mental arithmetic and analyze the situation on-the-go may be extremely useful for both players and traders.
So what’s good for me: poker or trading?
Only you can answer this question because everything depends on your mindset and character. The best advice will be to analyze the advantages and disadvantages of each system on your own and decide where you personally have a better chance to succeed. For our part, we can offer many automated tools and an extensive knowledge base on Forex trading. We wish you the best of luck!