If you observe a poker game you would realise that there are plenty similarities in poker and trading. One can actually learn a lot from poker players about the trading world. It is a well-known fact that most of the best candidates for trading jobs at Wall Street are professional poker players. And this fact has been justified by the Department of Economics in Harvard University.
In poker, it’s all about managing your risk properly and executing your play with consistency, this won’t be gambling, this will be basically playing the odds. It’s the emotions that throw a player off his game and he starts to gamble with his money.
So what are the important things a trader can learn from poker?
The strategic approach
First off, it’s the strategic approach. For example, if a player has an above average expectancy over a series of hands, he’ll know that he’ll have to execute his strategy over a large enough series of hands to see it play out in his favour. Similarly in trading, if you have entered a perfectly good looking setup, you’ll have to make a plan first and then let the trade play out for you.
Know when to ‘hold’ and ‘fold’
The next thing, quite famous with those poker players, is that they know when to ‘hold’ and when to ‘fold’. One simply cannot escape losses in trading, so a trader must know when to fold and when to keep on playing. Then comes the risk management. Poker and trading are all about taking risks. Management of chip stack is a great tactic in poker. Like any poker professional, one can neither bet all the chips on a weaker player, nor play very easy on a stronger one. That’s how one can play steady while being on the edge too. An expert places the trade when he comes across a low risk chance.
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