Poker and trading, share several notable characteristics. Both activities require strategic decision-making based on limited information, and the skills you need for successful progress rely on the same fundamental thought processes.
Playing poker online can help to improve your critical thinking, perfect your risk management, and prepare you for the nature of stocks, options, and other speculative investments. In fact, according to multiple studies, poker players make for highly effective traders, and it is well-known that traders who try poker tend to do fairly well in the game.
With that in mind, let’s take a closer look at the common elements of poker and trading, and see if we can find all the skills that apply to both endeavors.
High Variance
Fluctuating odds make poker and trading highly volatile. Every poor hand or low stock has the potential to become a winner, and even if you perform all due diligence beforehand, what you thought was a sure bet can become a failed investment in the blink of an eye.
This high variance teaches players and traders alike how to deal with the volatility and to accept that there are factors outside of your control. Studying variance patterns can provide a modicum of insight into the expected behavior of peaks and lows, but there are no guarantees when you’re dealing with variable odds and free market dynamics.
Percentage-Based Uncertainty
Speaking of variable odds, poker and trading rely on sound risk management strategies. Bets and trades can’t be made without inviting risk, and the main challenge comes from dealing with unavoidable unknowns.
When you are playing poker, you have to assess the odds of certain cards being in your opponent’s hands, factor in the cards on the table, and decide whether or not your hand is the strongest. This is the same process followed by traders, except the cards are stocks, the opponents are market forces, and you can’t bluff your way to victory.
Timing
Knowing when to hold and when to fold applies to trading as much as it does to poker. In both fields, timing and execution are everything, and you have to take swift advantage of any and all windows of opportunity that happen to come your way.
Stock markets and poker tables leave it up to you to decide. You are not pulling a slot lever and letting RNG decide, nor should you be buying stock blindly. Each trade and bet has to be made with confidence and a plan in mind, but you also need to adapt to evolving situations and adjust your tactics when things aren’t going your way.
Emotional Control
Being unable to control your emotions will make poker and trading exercises of futility and frustration. Mental discipline is extremely beneficial in both fields, whether you are reading opponents, dealing with losses, or managing your finances.
Emotions should never factor into your decisions, but it is important to remember that they can play a part in market shifts. Many new traders follow trends without doing their own research, out of fear of losing out, whereas experienced traders will perform as much market analysis as possible to capitalize on unexpected shifts, like trend reversals, for instance.
Experiential Expertise
Becoming a skilled poker player or proficient trader takes time. There are no shortcuts to reaching the proverbial summit, and the ascent to expert levels of knowledge usually involves its fair share of mistakes and miscalculations.
If you can learn from your experiences and prepare for any potential outcome, the success rates for your games and trades will mature steadily, but again, it is worth repeating that even the best strategies can fail. Luck does affect both ‘fields of fortune’, but it has far less of an impact when you are able to calculate risk vs reward for every hand and every stock.
Strategic Goals
Experienced traders and veteran players use long-term planning and goal-oriented strategies to maximize their odds of success. These are the most critical aspects by far, yet they are often overlooked by newcomers, who place far too much emphasis on short-term objectives.
In order to play and trade effectively, you have to engage in these activities responsibly by avoiding hasty decisions and factoring in every source of information available to you. Ultimately, informed and experienced traders make better decisions, and the same goes for the best poker players. In both cases, you are playing mind games and predicting outcomes, and the aim for the end result is to win more than you lose.
