Do You Believe All the Trading and Poker Analogies?

A lot of similarities get drawn publicly between trading and poker, and as a result, the debate was really hot for a while. To be honest, though, I'm glad the trading and poker discussion has since subsided a bit, but maybe not for all the reasons you'd expect.

You see, I tend to agree with some of those trading and poker analogies. I just think that before simply buying in, you must assess for yourself whether the supposed parallels between trading and poker are real and can be used to your advantage, and we'll examine both sides of the issue here today to help you decide.

Do Not Compare Trading and Poker…

Trading and poker both get portrayed on TV and in the media as very lucrative endeavors readily available to everyday people. It's fun and fascinating to watch as TV poker players bet tens or even hundreds of thousands of dollars at a time, and at the final table, they take some big and calculated chances in pursuit of that multi-million-dollar prize! There's so much glitz, glamour, and excitement, and winners—many of whom are already rich—get richer in an instant with the simple turn of a card. But the reality is that trading isn't like that, and beyond the TV limelight, poker isn't, either!

See also: How to Turn off Trading Expectations

Instead, day by day, and hand by hand, players try simply to protect their capital, play only hands where the odds are in their favor, and not waste any money chasing pots. And over the long term, they see results, not because of one big gamble that pays off, but due to the highly disciplined, workmanlike approach that preserves winnings largely by limiting losses.

Ultimately, that's how trading and poker really are similar, and not the fast money, luck, and high stakes.  So while not the only one, that's the #1 problem I have whenever people say trading and poker imitate one another.

…Yet I Agree There Are Many Similarities between the Two

Don't mistake me for a critic, though! Actually, I will be the first to admit that beyond the money, the luck, and the chance, trading and poker are quite similar. In both, strategy is paramount, and success requires patience and confident decisions made despite incomplete or imperfect information. The processes used for both are often remarkably aligned, so there's much that traders can take away from playing and/or studying poker. That's why, for these reasons and others, I wouldn't completely discount all the trading and poker analogies we tend to find out there:

It's All about Executing a Strategy

Strong players play strong hands for which the odds are in their favor, and they leave the rest, much like profitable traders take only high-quality, proven set-ups in their desired market(s) and time frame(s). The goal is to make money, not to play every hand, and poker players often exhibit that uncommon patience, and a willingness to sit on the sidelines and wait for the right opportunity, that traders should strive for.

Measure Results over Long Term

Fast money and big risk aren't what trading and poker are about. That's why poker tournaments can take days, and hundreds of hands or more, not just one or a couple. Likewise, in trading, a strategy is never invalidated because it produces one or even a series of losing trades in the short term. Limiting losses and being profitable over a larger sample, like a month, a quarter, or a year, are what really separates the best from the rest.

Leave Emotions Out of it

Poker players are infamous for being some cool characters, stone-faced even under extreme pressure. Many play under hats, hoods, and behind dark sunglasses, and some barely speak. They're "in the zone" and focused intently on executing their strategy and maintaining a competitive edge, not thinking about how much money is at stake or allowing fear and emotion to impact their physical state or decision making. Needless to say, traders can learn a lot from that!

Conclusion

On one hand, the high risk, and the pursuit of instant fortune and celebrity means that trading and poker are nothing alike. But on the other hand, the strategy, patience, and confidence required to excel in either suggests that trading and poker are very much alike! So, in which camp do you belong?

Well, as you can see, I'm somewhere in the middle, and while I strongly urge you not to associate trading with the glitz and glamour that always comes when watching the pros play poker on TV, there's still much you can learn from them. Whether it's the unwavering commitment to their methods, or their poise and confidence under pressure, it seems that many of the same qualities that help elite poker players reach the top of their field can help traders as they aspire to reach the top of theirs. So think about the connections between trading and poker if you so choose…but make it about reality, and not the fantasy that is so often portrayed on TV!