[mrbaseball]

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Why I think poker is relevant to being an investor (not irrelevant to trading, btw…I just think its excellent for investing)

1. Reading tells. Non professional investors do not understand that hundreds of millions of dollars are moved after a single meeting with top management, often on very subtle interpretation of what is said and how.
2. Understanding risk/reward. You can be a great investor and be wrong as often as right…its just key to be right big and wrong small.
3. Not going on tilt, withstanding negative variance. Investing is a wildly emotional business for most people. If you allow these emotions to affect your decision making its very expensive. I have seen it ruin careers.
4. Pattern recognition (I believe this is numero uno). Stocks, like poker, lend themselves to saying “when this set of events/circumstances/factors converge…the outcome is generally xxx.” This was my strongest skill as an investor.
5. Math. Nice, but not crucial.
6. Related to #3…ability to handle losing on a constant basis (gross losses, not net).
7. Comfort and skill in making decisions in an environment of partial information.
8. Intellectual arrogance…by this I mean that the best investors’ believe that they have the ability to see things more clearly than others and can make money despite the Efficient Market Hypothesis…you have to think you are just flat out smarter than most of the other people in the market. You have to have this confidence in poker, too (I understand it’s a fine line between reckless arrogance and confidence...)


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Actually these are the exact same reasons trader would give.

1. Reads are key in trading. Decifering those fed statements, breaking news, numbers. In the pits it's the entire game. Reading the brokers, knowing who's stuck and who isn't, undertanding what is happening with order flow and what big players are doing what. This is why a lot of pit guys have trouble transferring to screen trading because they lost their reads.

2. Same for trading. The old adage "cut your losers short and let the winners run". A trader not understanding risk reward doesn't last at all.

3. Tilt kills traders. I've seen guys lose it all and then some totally due to tilt in an arena where the stakes are unlimited. You can keep trading until the close even without chips!

4. Pattern recognition is what technical screen trading is all about.

5. Ditto

6. Ditto

7. Ditto

8. Ditto

All that said I feel that both successful traders and investors have an easier time transferring their skills to poker than poker players have transferring theirs to trading or investing. Although a poker player will have advantages over those who never really dealt with a lot of risk/reward types of decisions.