Better poker means better trading

Author: Simon Dexter

Stock markets are rarely out of the news and following China’s stunning acquisition of a 12% stake in the mining group Rio plc for billion last week, individual investors should keep a watchful eye on natural resource ownership and the increasing propensity of cash-rich sovereign states to secure as much of it as possible via the world’s stock markets. Such moves are the effective application of investment strategies on the grandest scale. They mirror much of what happens at the poker table.

Earlier this week, one London trader revealed that the most popular book currently doing the rounds in the City is Market Wizards by Jack Schwager, which makes clear the similarities between poker and trading as the following extract proves:

“I learned how to play poker at a very young age. My father taught me the concept of playing the percentage hands. You don’t just play every hand and stay through every card, because if you do, you will have a much higher probability of losing. You should play the good hands, and drop out of the poor hands, forfeiting the ante. When more of the cards are on the table and you have a very strong hand – in other words, when you feel the percentages are skewed in your favour – you raise and play that hand to the hilt.

“If you apply the same principles of poker strategy to trading, it increases your odds of winning significantly. I have always tried to keep the concept of patience in mind by waiting for the right trade, just like you wait for the percentage hand in poker. If a trade doesn’t look right, you get out and take a small loss; it’s precisely equivalent to forfeiting the ante by dropping out of a poor hand in poker. On the other hand, when the percentages seem to be strongly in your favour, you should be aggressive and really try to leverage the trade similar to the way you raise on the good hands in poker.”

It would appear that attaining a level of poker proficiency ensures success not just at the poker table, but in the markets too. No wonder those City boys follow the game so closely.

Tags: poker, Poker Strategy, stock market, trading

This entry was posted on Thursday, February 7th, 2008 at 10:19 am and is filed under News & Promotions Blog.