Zen and the Art of Poker

[DbPhoenix]

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If you really are interested in getting enlightened, one way would be to go off to Tibet, crawl in a cave, and sit there meditating for thirty years. Another equally good way – but much, much faster – is to trade the S&P. (Bill Williams)

Motivated by Frank's excellent MIP thread, I'm initiating this thread to explore Larry Phillips' Zen and the Art of Poker.

A lot of smart stuff has been posted on message boards, and much of it has been lost, not because it has literally been deleted (though that is sometimes the case), but because it has been forgotten. People move on, they quit, they die, and it's important to pass the good stuff on so that those who read it when it was posted aren't the only ones who benefit.

Years ago, a guy named William posted the rules from Phillips' book one by one in order to encourage reflection and discussion, and this is my purpose as well. I'm not going to post all the rules because, as I said to William at the time, not all of them are as clearly applicable to trading as others. But you will see how very applicable to trading many of these rules are.

There's been quite a lot of editing here. William edited the rules himself, and I've edited William's elaborations to some degree. Keeping that in mind, the bold entries are from Phillips' book and the rest, unless otherwise attributed, are William's. I'll post the rules one at a time, and I encourage those who are interested to read each one, think about it, and post those thoughts here. This thread may then become a means by which traders may grow.

[DbPhoenix]

RULE #1: Learn to use inaction as a weapon.

Most of the time, the market is indeed random. One can only win consistently by avoiding activity most of the time and trading only the few times during the day when a high probability trade occurs. It is our job as traders to wait more than we trade. (William)

[DbPhoenix]

One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do. Most people always have to be playing; they always have to be doing something. They can't just sit there and wait for something new to develop. I wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, 'I just lost my money, now I have to do something to make it back.' No, you don't. You should sit there until you find something. (Jim Rogers)

[DbPhoenix]

RULE #2: Don't get irritated or angered by long session of folding.

We are all playing probability over a long run. Understand it. Accept it. Mentally prepare for it. Keeping our heads makes all the difference. (William)

[CandleWhisperer]

	Quote:	DbPhoenix
	RULE #1: Learn to use inaction as a weapon. Most of the time, the market is indeed random. One can only win consistently by avoiding activity most of the time and trading only the few times during the day when a high probability trade occurs. It is our job as traders to wait more than we trade.

First, very nice thread. Thank you.

Second, I am a bit hesitant to post because I do not want to disrupt the flow. Please let me know if you would rather not have posts such as this.

I recently posted a chart in the VSA thread that has some applications in my mind to what has been said here.

Many traders, both VSAers and others, are trying to catch tops and bottoms. There is a desire to buy bottoms and seller tops. I think this is a mistake. In the chart the best entry is after the appearance of the second test (from left to right). While it is true that many methods would show other and sooner entry points, with INACTION one is able to enter at the most PROBABLE point. In other words, the "Best" price does not necessarily mean the most probable entry price.

One can let the market tip its hand. As someone here once said, surrendering to the market is about letting go. It is about NOT forcing the issue. It is about inaction. Getting in tune with the market is about detaching oneself from the market to clearly see it.


Often probability and inaction lead to profitability without the ego of top and bottom fishing.

[DbPhoenix]

I don't want to play censor, which I wouldn't be able to do anyway since I'm not a moderator. But I don't especially want to play traffic cop, either. To do so, or even to try, would throw a blanket over free discussion, and that would defeat the purpose of the thread.

That having been said , I equally don't want this to turn into yet another debate about VSA, MIP, SMI, candles/uncandles, bars/lines/dots, LII, and so on. What's being said in the book and in these posts is independent of all that, or should be. You may think that top and bottom-fishing is not a good idea while others do quite nicely by doing just that. You may think that candles are indispensable. Someone else may think they're silly. In other words, just because someone doesn't understand something doesn't mean it's nonsense; just because someone doesn't know how to do something doesn't mean that it can't be done.

Using inaction as a weapon means simply that one must learn to be "aggressively inactive" while waiting for what he has proven to himself and for himself to be high-probability setups. Someone else may think that his HP setups are completely loony, but that's not the point. They are his bread-and-butter setups, and whether or not anyone else can profit from them is irrelevant. He wouldn't be implementing them if he weren't making money with them. Unless, of course, he himself is loony.

It is the nature of trading that the trader is going to spend a great deal of time waiting, unless he doesn't have the discipline to wait for what he wants (though he must of course also know what it is that he wants, which is where defining the setup comes in). If the trader doesn't know exactly what it is he's looking for, then he is far more susceptible to being sucked into low-probability trades, particularly if he is eager to trade. By thinking of inaction as a weapon and using it as such, he will find himself aggressively withstanding the Sirens who are tempting him to act impetuously. He will be "aggressively inactive".

As to the "flow", no one should be concerned with interrupting it because there likely won't be one. There will be quite a few rules touching on a variety of subjects and there's no particular linearity. But keep in mind that these rules should apply to everyone, regardless of what he does or how he does it or when he does it or how often he does it. If everyone avoids being judgmental, everything should go swimmingly.

[DbPhoenix]

RULE #3: If you've been folding a lot, for a long time in the game, and you're starting to think that maybe it's time you got in and played a few hands again -- that's not a good enough reason. Keep folding.

The level beyond this is having no desire to act inappropriately- to be so immersed in the moment and the process that time does not exist and thus impatience does not exist.

Great traders have rituals they enjoy for their own sake, a method and a habit that acts as its own reason for being. When you have this mindset, impatience goes away; whatever is in front of you becomes too engaging to worry about what you aren't doing or could be doing.

The amount of time a trader should be willing to wait for a good trade is infinite, because with the correct mindset the trader isn't actually “waiting” in the traditional sense; being and experiencing yes, waiting no. (darkhorse)

[brownsfan019]

	Quote:	DbPhoenix
	RULE #3: If you've been folding a lot, for a long time in the game, and you're starting to think that maybe it's time you got in and played a few hands again -- that's not a good enough reason. Keep folding.

This one hits home esp. after playing in a WSOP satellite yesterday. Long story short - I thought I was going to fold my way out of the tourney. Then lady luck came over and said hello and in a short time my $10k in chips turned into $53.5k in chips.

While this example is really about poker, the translation over to trading is strikingly similar.

Great thread DB! Keep it going!

As a wannabe poker player, I am enjoying it!

[DbPhoenix]

RULE #4: Don't feel like a martyr when folding.

Don't start feeling self-righteous about all this folding you are doing... as if now it owes you (because you've been so good, so disciplined, so patient...). This is a trap... As you keep folding, you must feel neutral about it. (William)

[brownsfan019]

Damn, this is an awesome thread about poker! (and trading)



DB - can you post links to more of this? Websites, books, etc. as I am in my learning stage of poker and have been gobbling up anything I can get my hands on.