What to learn from poker players?

What to learn from poker players?

Excitement and risks, greed and fear are the constant companions of all card players and traders. It is these passions and personal qualities that bring together the best representatives of professional poker and financial market traders. Genuine gurus from the world of trading are increasingly found in poker tournaments and often win them. 

Poker players master the methods of risk and capital management, presented by modern financial and economic practice, and then join the currency trading, futures and other instruments of financial markets.

What is the difference between a market’s hand and poker hand, poker bluff and political bluff, and what else is there between trading the most popular card game in the world and trading?

Optimal solutions for incomplete information

The idea of ​​the most effective gaming and trading processes, in the name of which various strategies are expanding, as well as methods of trading, playing, analyzing, risk management, and many different related skills, it is necessary to make the most appropriate decisions without owning a complete picture of what is happening. Poker is unpredictable in relation to the cards coming into the hand and on the table, and therefore gaming skills depend mainly on the ability to mathematically analyze the incoming data and psychological practices, bluffing.

Speculative trading in financial markets is conducted on economic data unknown to the vast majority of participants until their official publication. Political events, and even environmental ones, also influence the price movement, and therefore we have to deal with the risks of incomplete awareness. Poker and trading are unpredictable.

Money Management and Risk Management

And to combat game and trading risks, trading capital management methods come to our aid. In poker, this practice is called bankroll management. These methods teach you to correctly and consistently calculate the game bet or the volume of the trading position, with the available data (price levels, patterns, other participants, risks, and so on).

In addition, psychology is already in use here, which operates approximately according to the following generally effective formula: greedy when others are afraid and bully them when they are greedy. This is a fair tactic for both markets and poker. By bluffing, one can compensate for a weak hand during a game, reverse a trading trend, or even level up the most powerful gaming opponents and market competitors with the ground. Good bluffing is good!

Psycho-emotional, not just rational decisions

Mathematical analysis in poker, technical and fundamental analysis of prices and markets is an excellent background, but no more. Ultimately, we should think about other players, about how they analyze and what decisions they make, so the best thing is to be able to feel the market/game as much as possible.

In poker, knowledge of psychology is manifested performatively – through psychological games with opponents, traps, bluffs. In the fundamental analysis of markets, macro-psychological models are often given, and methods of social psychoanalysis are widely used, which are perfectly complemented by modern technologies for processing large amounts of data ( big data, data science).

In general, these psychological models and the main recommendations on them are similar to each other:  

  • make decisions based on empathy and analysis of emotional models of competitors;
  • fight psychological distortions, such as loss aversion, planning errors, and especially the so-called confirmation bias – propensities to confirm one’s point of view;
  • timely and systematically work on their psychological stamina, analyze personal and third-party practice, work with thematic literature and other materials, engage in development and research.

Mathematical Analysis and Modeling

All this mainly concerns the theory of probability, as well as the analysis of correlating macroeconomic factors. On forex, it is universally automated, and in poker, you need to learn to count in the mind and apply various algorithms and strategies for analysis and risk management.

The most famous mathematical betting control systems among fans are the martingale and parlay systems:

  • Martingale: any losing bet or position is compensated by an increase in the volume of the previous one until it covers losses and makes a profit, after which trade or game is conducted from a minimum volume
  • Parlay or anti-martingale: after winning, the bet increases, not decreases

These are not the only, but only illustrative mathematical systems for managing rates and trade orders, and in fact, there are a great many of them. In trading, during the technical analysis of prices, mathematical forecasting algorithms are used in the development of indicators and trading advisers, but in poker, automation is prohibited, although it is partially allowed in online versions of the game (calculators and other software), but is not welcome. It’s time to tighten up the oral score!

There are a lot of similarities in poker and trading in the Forex markets: money and risk management, mathematical analysis, psychology, and the fight against competitors. Poker teaches good gaming tactics, combinatorics, situational analysis, psychological games, and trading – semi-automatic analysis, long-playing strategies and working with large amounts of data. But one head is good, and two is even better. Therefore, improve both in tactics and strategy, in general, and practical psychology, and then you can confidently deal with both situational and long-term risks.

Which traders play professional poker?

  • David Einhorn is a well-known American financier and trader, founder of the hedge fund Greenlight Capital: in total, he won about $ 5 million in World Series of Poker (WSOP) tournaments
  • David Frankenberger – JP Morgan Trader: About $ 2.5 Million at the 2011-12 WSOP Tournaments.
  • Bill Chen, Head of the Statistical Arbitration Division at Susquehanna International Group, won $ 1.6 million in the 2008 WSOP.

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