Poker and Stock Market

I was out of town this weekend in southern New Jersey, Atlantic City to be exact. After finishing my work at the convention center, I traveled back to the newest casino, the Borgata, where I would spend the night. I don’t consider myself a player and I have never liked losing money at the tables. When I play, my favorite games have always been craps and blackjack. Until recently, I have never played at a poker table in a casino setting, but I do enjoy the game of poker and have only played backyard and basement games with old friends. Many people consider the game of poker pure luck, but this is not an accurate observation. Many factors run parallel to the game of poker and the game of stock trading. Luck can play a role, but rules, odds, and money management are the most important components of the two entities.

When investing in the stock market, it is essential to have a strong set of rules or a system that has been tested in real time, without the need for back testing or historical testing. Once the system has been tested, the investor must follow the rules to preserve capital and reduce losses. The investor must also consider the probabilities that his shares will make a profit or loss. Price targets and targets should be an important part of every investor’s system. With proper money management and a calculated expectation, the investor should aim to trade only in situations where the odds are in his favor. In a strong bull market, it may not be wise to start shorting a lot of stocks; the odds of making a big profit with this strategy could be very low. Another important component that makes its way into investing is psychology and / or human emotions. Actions are made up of human character traits, similar to the type of people who own them. Some stocks are risky and volatile, while other stocks are conservative and predictable. The market repeats specific graphic patterns and cycles because humans repeat their actions and character trends.

Now back to the poker table; When I sat down and started playing, my first goal was to become familiar with the character traits of the players around me. With 10 players at the table, I had a lot of time to evaluate the people I was playing with, without risking a lot of money. After several rounds of play, I realized that the knight to my right would only bet the odd-high hands and fold on all other hands. He was very nervous and nervous and folded his cards tightly when he was angry. The gentleman on the left also played hands with high odds, but I saw him call bets with some hands that were risky with lower odds. A gentleman across the table was the braggart and always had a smile on his face with a pair of dark glasses. I challenged this man on several occasions and paid to see his cards because I felt like I had nothing. Most of the time, he was right and still beat it with an average hand. I could go on, but you understand the point I’m trying to make: all poker players and investors bring their emotions to the table.

I won’t go into the exact rules of playing poker, but I can tell you that only two players are required to bet per round, while the other eight can see their first two cards without risking a penny. My game of choice is Texas Hold’em, the current craze across the country and one that excites me when I’m in the environment. The two players required to bet represent the big and small blinds. If you are the dealer or host other players at the table, you can see your first two cards for free without a bet. If the hand is weak, you can fold and keep your play bet.

Here it is where it gets interesting; if I have a decent hand, I can decide to call the big blind and see the next three cards on the flop, which is still a low risk investment. If the flop doesn’t give me the cards I need, I can cut my losses right away and fold and wait for the next game. The same goes for investments; I can shorten a loss and wait for the next opportunity without risking the farm if I realize an immediate loss. If the cards are good and my chances of winning the hand are high, I can call or raise. A fourth and a fifth card (the turn and river) are placed on the table after the flop and betting continues with each round. Again, I can decide if I would like to pay, raise or cut my losses. The connection I am trying to make with investing in the stock market and playing poker is directly related to reducing losses (preservation of capital and money management) and my chances of winning the game (in the stock market this could be called expectation).

In my opinion, the best game to play at the casino is $ 1 to $ 2 with no limit. This means that the blinds are kept to a minimum and in many cases it will only cost you a couple of dollars to see the flop. The “no limit” aspect that your upside potential is unlimited, which translates into reversal. If you shorten losses and ride your winner, the upside potential of the investment can also be unlimited, especially when using options (but that’s for another discussion). Last night, I got to see my first two free cards, eight out of ten hands, and could fold if they weren’t good. If they were good, I would put money on the table according to my idea. In the real world, the world of stock investing, you should always bet on your best ideas. The resulting profit or loss will tell you if you are right. Again, for the umpteenth time in this article, the most important part of both games is cutting losses and moving on without mixing emotions in decisions.

All investors and poker players bring emotions to the table, some people control them better while others employ better systems and understand the odds on a higher level. The bottom line is to understand the situation around you and use a sound system to increase your odds. Never bet on a hand that represents a low probability of winning and never mount a loss that could multiply overnight. Cut the losses and get out of the game and wait for the next opportunity because they are always around the corner.