5 Trading Lessons That Poker Can Teach You
We take a look at how some of the successful qualities professional poker players employ are very similar to those of professional traders.
Dont Play Every Hand
Every poker player has a strategy and a table set up that plays to their strength. This is when they go “all in” or increase aggression. We as traders must know when market conditions favor our strategy and in these times we take on more risk. One way to maximize this is to rank your trades into levels or tiers. That way when you see tier 1 trades those are full size- max risk. On plays of lesser tiers, simply reduce position size way lower or do not play at all.
Keep Your Emotions In Check.
To me your emotional state is what ultimately will determine your success as a trader. As traders we have it easier here than poker players. When we get upset or frustrated we can simply get up and walk away, although most traders never do that the fact is you should as you will never perform to the top of your game when you are angry. Since poker players have to sit through the game when angry and because facial expressions mean so much to the game its paramount that they keep focus and keep emotions in check
Know the big stack bully
In poker the big stack bully is the player with the largest stack of chips. Sometimes that stack can be so much larger than the rest of the players that the big stack bully can aggressively raise bids and and force those with smaller stacks right off the table, even if they don’t have a good hand. Not only is the big stack bully important to traders but also in about every corporate environment in the world. There is always a bully. For us traders the big stack bully is the large funds and institutions. These firms will always have the upper hand and since they are quite possibly trading with billions while retail traders are trading with thousands you stand almost no chance. Know when they are pumping or increasing a stake in a particular company and be sure to trade with them not against them.
Be Patient.
This is a given! Poker players know that the game lasts a while sometimes several hours and in that time there will be good hands and bad hands, the hard part of course is that the good and bad are in no guaranteed order. For us traders we experience the same thing. Some days there are too many great trades and you cant put a foot wrong and there are some days you cant put a foot right! It is important to remember that just because the market is open doesn’t mean you have to trade. Fighting off the impulse to trade when nothing is there can be difficult but you have to do it if you want to stay in the game. Cash is a position too.
Stuff may go full tilt in a second
At any moment no matter how awesome or grim it may be that can change in a flash! You have seen big stack bully players get wiped out on one hand and I have seen traders get wiped out on one trade. In our game you are only as good as your last trade. In a successful career you will be defined by several good trades as opposed to one single great trade. Markets are constantly changing and just like top level athletes and poker player those who evolve are work to get better will be the great ones.
Doug
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