Poker Gives Traders An Edge

5 years ago
Poker And Trading
29 Mar

The game of poker can be a very valuable life experience in many ways if you have the right approach. To be a positive in your life, however, you have to take the game very seriously, be prepared to learn, and most importantly, be prepared to lose. Because like in real life, losing will happen whether you like it or not, and to become a winner, you have to take away a lesson from every lost battle.

If you can do that, you will go far and you’ll also have the unique chance to take what you’ve learnt and apply it to other domains, domains like financial trading. That’s why US trading companies like Susquehanna International Group advise new employers to take on poker, learn the strategy, and experience the thrill on the green felt.

That's also why 2005 WSOP Main Event winner Joe Hachem explained in an article for the Australian Financial Review a couple of weeks ago that poker can give the trader a definite edge in his battle with the market. Hachem, who is currently number one in the HendonMob Australian All-Time Live Tournament Money List with over $12 million, is an individual trader in his home country and doesn’t miss any opportunity to use his edge whether is on or off the green felt.

And he isn't alone in that lifestyle. Many current poker pros have come from trade jobs, or vice versa. Take Andy Frankenberger, pictured in the header, for example. He is a former JP Morgan trader who now has claimed nearly $3Million in live earnings at the poker table.

So what did we learn from the AFR article? How does the game of poker give traders an edge? And can a poker player be a successful trader as well? Read the next paragraphs, and you're going to find out.

Money Management

We all know that without proper bankroll management, a poker player cannot be a winner. As we learn the game more and more, we’re starting to really see the truth behind that statement. And guess what? This type of money management is also very useful (if not essential) when it comes to financial trading.

Like in poker, you also have to think of “buy-ins” when you make a trading plan. How much are you willing to risk in a buy or sell order? More than 25% or 30% of your bankroll? Well then you must have registered at the Sunday Million while having a $1,000 poker bankroll. ‘Cause those two cases are pretty much similar.

Also the trader must think of stop losses and take profit situation. If you have a poker background, this can be done very easily as it compares to calculating some basic hand odds. The good thing is that a poker player knows what a game of chance means. A very good player knows how to maximize his profits and minimize his losses. For us, thinking in terms of buy-ins, percentages, and variance is second nature so, as a consequence, the transition to financial trading is easy as one-two. Isn’t that wonderful?

Check Your Ego At The Door

Like in poker, to be a successful trader means to make rational decisions and NOT emotional ones. Remember that time when you let your emotions control you at the table and made things personal with an opponent? All poker players know that story, and all know that it ends badly. How about playing on tilt? Lost much? Of course you did, because that’s what happens when we let our emotions get the best of us.

Change Gears

All players who have played the game a considerable amount of time and who read at least some basic strategy know that it is imperative to change gears in order to become a winner. Whether you play SNGs and you start things off tight only to loosen up in the late game or whether you play cash games and you adopt a particular strategy against a regular and a totally different one against a fish. You all do it on the green felt even though you might not consciously recognize it.

In trading, you can apply the same strategy: you have to adapt and not take anything for granted. Today’s market conditions may be entirely different than tomorrow’s, so you’ll likely have to change gears on the go. Don’t enter the niche with preconceptions thinking that you’ll buy certain stocks without even looking at what’s in front of you. It would be like sitting at the poker table and labeling all players before the game has even started. Or continuing to label one opponent as a fish even though you haven’t seen him at the table from quite some time and his play has considerably improved.

These foolish plays will certainly lose you money in the long run. But we believe you all know that, so if you see your stock as an opponent and analyze it thoroughly before acting, you’ll definitely have a head start compared to the other newbie traders.

Is Poker The Key To Trading Success?

Now that we've cleared the air and told you about the many similarities between poker and financial trading, you may be considering giving trading a go. It actually could be a good decision, but before actually going all-in, you also need to know the major differences.

First of all, a lot of traders and poker players say that trading has actually a much higher variance than the game we love most, so be very careful when using your money management strategy. Moreover, the bankroll you need to make the profits actually count must be considerably bigger than the one you need to play online poker. In the trading niche, you won’t have the nano and micro stakes where you can learn the game comfortably. You may find some intriguing leverage ratios and minimum deposit options, but don’t mistaken those for with playing at micros. Even more importantly, you won’t be capable of moving down stakes when you’re on a downswing which means not much space to maneuver.

So be very careful if you choose to invest your time and money into the trading business. While the skills acquired in the poker world may be indeed valuable, those same skills won’t buy you a one-way ticket to success.

Eager to share your experience as a trader? Then please use the comment section below and tell us more about the trading business as seen through the all-watchful eye of a poker player.

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Florian is a freelance journalist and avid poker player with a strong passion to create unique and appealing stories.He is an experienced researcher on various topics, from business and the financial markets to psychology and the gambling industry.He blogs at more


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