Can Traders Learn *Anything* from Poker?

Several years ago I started playing poker as an intellectual pursuit with the intent of learning some lessons from the poker world that I could apply to my trading. I thought as a trader that I had a healthy view of money that would give me an initial boost in poker. Bankroll management? That’s the basic skill of a trader and applying that to poker was second nature. There are a lot of parallels with poker and trading and I thought that my trading experience would ultimately translate well into poker.

I have mostly abandoned “serious” poker at this point for a variety of reasons and this post will explain why. I feel like I’ve gotten all I can get out of poker and while I’m mostly disappointed that I wasn’t able to apply more to my trading I did learn one very valuable lesson.

My Initial Goals for Poker

I set out with a handful of goals for my poker endeavor:

  • Have fun (not hard to do at a poker table!)
  • Learn some skills that I could apply to my trading to take it to the next level
  • Relish being a beginner at something and enjoy the process of improvement
  • Making money playing poker was, of course, a goal but definitely secondary

My Poker Process

Live Poker in a Casino

The nearest casino to where I live when I started playing was Harrah’s in Cherokee, NC which is about a four hour drive. A good friend of mine has played poker somewhat seriously since college so we have organized a couple trips a year to either Cherokee, Las Vegas, the Hard Rock Casino in Tampa, and more recently the MGM at National Harbor after it opened a few years ago.

Live poker in a casino is a blast – if you haven’t played in a casino I’d highly encourage you to do so. I thought it was going to be a seedy place with a bunch of low lifes but nothing could be further from the truth. Although of course there are the occasional jerks, I have been consistently amazed at the friendliness and camaraderie at a poker table at a casino. You see all sorts of people from all walks of life coming together to play an awesome game with a perfect blend of skill and luck. I’ve played a lot of hours in casinos and I’d say that the average poker player is far more fun and friendly than the average person.

Home Games

My friend also hosts a home game 5-6 times a year so I got his advice for hosting my own game. His game is always a tournament and I knew I wanted to play cash games, so I started hosting my own monthly home game. These are extremely low stakes games that are mostly just fun. Even the good players aren’t taking the game that seriously and the “cheap thrill” of poker at these stakes ends up being a very inexpensive form of entertainment.

Playing Online

I also played a bit online although it’s quite difficult to play now in the US and the competition even at the lowest stakes is very strong these days. I like being able to use a tool like Poker Tracker to track performance over time. I don’t play online anymore just because playing live is so much more fun. Playing online does allow you to play a LOT of hands pretty quickly so in that regard it’s good to play online to advance past the basics. After that I found it too tedious and just craved playing live.

How are Poker and Trading Similar?

  1. They both require a basic level of risk management
    Money management (usually called “Bankroll management” in poker) are requirements in both disciplines. How much can you afford to risk with each trade/session?
  2. You will have to be able to endure drawdowns
    And I mean large, soul crushing drawdowns that can last a long time. Some very good poker players can have drawdowns that last 100,000 hands. In poker this is called variance. Sometimes you trade exactly right and follow your system to a T and lose money. Same with poker. I had multiple sessions/trips where I ended up down multiple buy-ins despite having played quite well. This is very similar to trading where you can trade well and still end up losing money over weeks or months or even years.
  3. The amount of work required away from the table/market is large
    Trader success as well as poker success is highly correlated with the ratio of time spent studying over the time spent playing/trading. Both disciplines reward the participants who put in study time.
  4. There are different styles/strategies that can work
    Loose aggressive, tight passive, tight aggressive, etc. – these are all styles of poker play that can be successful depending on your personality. These are roughly analogous to trading strategies (kind of).

How are Poker and Trading Different?

In trading I have a few pre-defined trading strategies that I use. I’ve researched them deeply and there’s no question how I should approach things during the trading day. I know the odds that trades from different strategies will be profitable so during the day there’s really not a whole lot of discretion for me.

This was ultimately a very difficult thing for me to transfer to the poker table. You can’t have planned for every situation at a poker table – there’s just too many factors to consider at any moment. There’s a LOT of discretion and judgement calls to make that you just can’t plan for ahead of time. You have to be able to study some general situations and then be able to apply a lot of different concepts in real time at a poker table when everyone at the table is anxious for you to play to keep the game going. This takes a tremendous amount of experience and study away from the table to get good at. It’s also one of the things that makes poker so great – talking about hands after the fact with other players. In some situations you’ll might talk to 5 different players and get 5 completely different opinions about the best action to take in a certain spot. This is one of the best things about poker that there’s not really an exact equivalent to in trading. Sure you can talk about trades after you make them but there’s nowhere near the same level of analysis that you can do after a poker hand.

I realized pretty early on that it was not going to be possible for me to be able to play enough poker to get enough consistent and intentional practice to get very good. You can spend a lot of time studying away from the table but you have to also play a lot of live hands to implement what you’ve studied.

So What Did I Learn about Trading from Poker?

Beyond the basics of risk management and putting in time away from the table/markets is there ANYTHING that traders can learn from playing poker? To be honest it was a good bit less than I was originally hoping for. My main takeaway from poker, though, is I think a very important one.

The best poker players can intuitively know when a situation arises where they have a strong edge and are able to exploit it as frequently and efficiently as possible. For example, recognizing when you’re very likely to have the best hand or when your opponent is likely to fold to a raise. The ability to know when these situations arise is vitally important in poker and the actual cards in your hand become less important – it’s more about determining what your opponent has.

In this case there is a definite parallel to trading: when you have a trading edge you should be able to recognize it and put on larger size. I’ve spent the better part of a decade thinking about this and I think I’ve made some headway. That’s my main goal for 2020 – trading with bigger size when I have an edge. More about this in another post.

My Poker Future

So am I abandoning poker? Not at all. It’s such an awesome and underrated game. I’ll continue my friendly home game and will continue making the occasional trip to a casino to play live when it’s convenient. Hopefully more casinos get built within driving distance one day and I can play more frequently live in the future. If you have never played poker I highly recommend you give it a shot!

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