Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

Soultrader

Applying Poker Strategies to Trading The Markets

Recommended Posts

As a professional no-limit holdem poker player prior to my trading career, I find that both professions share many similarities. Poker and trading are both a game of probabilities. Individual psychological makeup is also important to control emotions during times of tilt and euphoria.

 

In poker, a player can choose the stake he is willing to play. In the futures markets the stakes are chosen by the size of the trade. However, one of the biggest differences I found is as follows:

 

1. In poker, you are automatically offered the option to play a hand that you are dealt. For example, in no-limit holdem this can be a Q10, KK, 10J, 2-7, etc....

 

Each starting hand begins with a probability. For example, pocket 9's has a 52.4% favorite against an AK suited. The odds of getting dealt a pocket pair are 5.88%.

 

2. In trading, you are not automatically dealt starting hands. Starting hands in poker equals setups in trading. In order to hold a pocket pair, you must find a trading setup.

 

Each setup has its own set of probabilities. A setup that offers a 80% winning probability should be ranked higher than a setup that offers a 50% winning probability. The more setups a trader has the more ammunition or hands he has to play with. If a trader only trades moving average crosses, this is like playing only a KQ in poker. In poker, waiting for pocket AA's will slowly drain your capital with blinds and is definitely not the way to get rich. However, a poker player who is flexible to play a variety of hands with a variety of styles is the better player.

 

A trader needs to have different entry/exit and risk parameters for each setup. If one of your setups involves moving average crosses, make sure you apply different entry/exit and risk parameters from a scalping setup.

 

I like to consider my trading freestyle. I am very flexible with the different setups I have. Trading requires creativity. Novice traders apply too much science into trading and not enough art.

 

Trading should be compared to a game of limit holdem. No trade is worth all your chips so do not hold a no-limit mentality. When in doubt, stay flat. As long as you play the right hands and control your losses, a trader should come out ahead.

 

Good luck and best of trading.

Share this post


Link to post
Share on other sites

That being said, The Theory of Poker by David Sklansky stats that a poker player gains an edge each time he plays his hand correctly each and everytime if he knows what hand you hold. Whether that may be betting, raising even folding.

 

Now if you apply that same principle to trading as to what the "pros" are doing, you can see how they have an edge on us smaller players, but if we think like a pro, we too can take advantage of that edge.

 

I am sure we've all had losing trades in our early days. Just think what you we're going through when you went long the break of the high of the day, only too see prices drop like a stone? There is a very good chance that break out was on light volume because there was no "professional" money involved with the push. Now once that pattern has been identified on the "battlefield" in real time, step up and enter your order.

 

Understand and implement the psychological part of trading and the rest should be easy.

Share this post


Link to post
Share on other sites

no mention of 'tilt' yet so I will enter it into the conversation...

 

tilt is when you begin to play/trade worse because you have suffered some losses. frustration is the cause. tilt is a MAJOR factor in poker. if you control your 'tilt' -- you have a much better chance.

 

in poker, it is widely accepted that absolutely everyone goes on tilt to some degree. don't think for a second that you are different -- it is human nature. the key is to try to recognize the conditions for when this happens and try to remove yourself from this situation.

 

the other day I suffered a brutal stop-out -- to the tick before the market went very strongly in my favor. this was kind of like losing a big pot for most of your stack and then only have enough money for an ante while you go on to make quads vs somebodys full-house (in poker, the biggest pots are when one person makes a really big hand but someone else makes a slightly bigger hand -- as opposed to making quads when nobody else has anything).

 

I found while playing online poker -- if you suffer a string of bad luck or you make some very bad decisions and you feel the frustration coming on -- it is often just best to shut your computer down and take a break. realize that your head isn't right and you should be patient and wait for it to be right again. shutting down the computer forces you to stop. so much of trading/poker is psychological. so I have adopted this to trading -- after a brutal stop out or just a bad trade -- I will shut my Tradestation down for a bit and take a break. get some air, get some water, take a shower etc... I find this prevents a revenge trade from happening.

 

controlling TILT in trading is extremely important, just like it is in poker. I just find that you must figure out a way to accept the fact that everyone goes on tilt --- and then to try to adopt some methods to limit the damage from this crucial factor.

Share this post


Link to post
Share on other sites

Very good points Dog!! I never correlated tilt to trading, but you are right on. As a novice poker player myself, I often find tilt coming into play and have to control it. It's very easy to get out of hand in poker, esp in live face-to-face games.

 

And it's great when you are in control and recognize that as well. That's something I've learned playing here recently too - capitalize on the players that get into a strong tilt.

Share this post


Link to post
Share on other sites

<<capitalize on the players that get into a strong tilt.>>

 

this is a very significant part of an 'edge' in poker. how do you control your own tilt relative to how your competition controls theirs? do you donk-off that incremental stack or two when faced with adversity? or are you the one gaining that extra stack or two when others face adversity?

 

poker and trading are so similar. playing poker is an excellent way to learn about trading, IMO. learning to control you emotions in a small stakes poker game is much less costly than learning to control your emotions in a trading account -- where the stakes are much larger.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • NFLX Netflix stock, with a solid top of range breakout, from Stocks to Watch at https://stockconsultant.com/?NFLX  
    • NFLX Netflix stock, with a solid top of range breakout, from Stocks to Watch at https://stockconsultant.com/?NFLX  
    • It depends. If you have lots of money that you can buy a house without a loan and if you don't have any parents to sponsor then it is a good idea. Otherwise it might be a bad idea depending where in Canada you are heading to. I earned a good middle income in my home country and I migrated to Vancouver 5 years ago at the age of 35. I had to start right from the bottom, lowest of the low.. Now i am finally earning a middle income in Canada but I still cannot afford to buy a one bedroom apartment. Having left behind friends, family and home, most of the times I think it is not worth it.   In short, do not migrate if you already have a good life in your home country and you are happy. Only migrate to Canada if you really have to leave your home country say there is a war or something really bad. Discrimination still exists here and its really tough for newcomers unless you are super rich. Good luck. David Chong, Quora  
    • This is bigger than the internet. Bigger than mobile. Bigger than social media.   While everyone was distracted by stock market fluctuations and political theater…   Most people have NO IDEA what just happened last week with ChatGPT.   Their new memory feature allows ChatGPT to remember EVERYTHING about you across all your conversations.   Think about that for a minute...   While most tech companies have been collecting mere breadcrumbs about you - your likes, your clicks, your browsing history - OpenAI is now collecting the most valuable dataset in human history: your complete psychological profile.   This is Zuckerberg x 5,000.   The more you use ChatGPT, the more it understands you, becoming a supercharged reflection of yourself that improves at an exponential rate.   Are you a regular ChatGPT user?   Consider whether it’s time to turn off the “you can train on my information” feature. To prevent your data from being used for training while still using the memory feature:   Disable Model Training: Navigate to Settings > Data Controls. Toggle off "Improve the model for everyone". Manage Memory Settings: Go to Settings > Personalization > Memory. Here, you can: Turn off memory entirely. Delete specific memories. Use Temporary Chat for sessions that won't be saved or used for training. Now the investment implications…   Why This is Bigger Than You Think Consider this: the relationship between humans and ChatGPT is evolving beyond a mere tool.   People are now treating these AI assistants as friends, confidants, and even romantic partners.   I'm not making this up - there are already documented cases of people ending real human relationships to pursue “connections” with their AI companions.   A viral Instagram meme shows a person going through life with a glowing, featureless humanoid figure - representing ChatGPT - as their companion.   The post has over 1.1 million likes and comments like "Bro ChatGPT is like my best friend. Ain't even ashamed to say it" with 25,000 likes.   But here's where things get really interesting for investors and entrepreneurs...   Three Things to Watch For starters, hardware is the next big thing for the big players.   The iPhone form factor is dead.   It hasn't meaningfully changed in nearly a decade. The next evolution in hardware will be designed specifically to interface with these AI companions.   OpenAI is already working on hardware with Johnny Ive, the legendary designer behind the iPhone and iPod. But you can’t ignore Elon Musk’s edge here.   So what does all of this mean for you?   The companies that control the personal AI relationships will be worth trillions. OpenAI and Elon Musk will have the coziest moats. We're witnessing the birth of a new internet - one built on agents that can communicate with each other across platforms. Google's new agent-to-agent protocol allows AI agents to work together without sharing internal memories or tools. The hardware companies that create the perfect interface for these AI companions will dominate the next decade of technology. And almost nobody is talking about what this means.   My prediction? Within five years, most people will have a personal AI that knows them better than anyone else. And they will interact with it in ways that seem foreign today.   (And, yes, it will almost certainly have dystopian elements.)   In the meantime, the biggest gains won’t come from household names. And, right now, James is seeing a prime opportunity to invest in the most under-the-radar plays in AI…   For dirt cheap. By Chris C. Source: https://altucherconfidential.com/posts/use-chatgpt-protect-yourself-now
    • KBH KB Home stock, nice day and rally off the 50.82 support area, from Stocks to Watch at https://stockconsultant.com/?KBH      
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.