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trading and poker
Posted: Fri Aug 01, 2003 5:20 pm
I played poker before I traded seriously. The subject of comparison and analogies between the two has intrigued me for long time.
Let me share you my observations;
Smart poker players end up trading or broke.
In my opinion there are just too many ways of getting broke in Poker. As I was watching the 2003 ESOP on ESPN it reminded me that there is only one person Doyle (Dolly) Brunson who won the title twice (if my memory serves right). Compare this to Golf where the top players routinely take titles 2-3-4 times or finish very high up.
Both venues you must have the edge. Having the mathematical edge can only and ONLY be achieved by playing the odds. If you can win 10:1 pot and it cost you total 5:1 you want to go for it. Conversely in trading; if you take 5:1 risk reward you will likely be ok on the long run.
The similarities end right here.
In poker to win (and I mean win some serious money) you must also have a player who has a second best hand. Bluffing and head-games make poker more of an art than science. A value of any hand in poker is relative to the best hand at the table at that moment. There is no serial correlation at all.
Any players on this board?
Insulting the Turtles....
Posted: Fri Aug 01, 2003 8:35 pm
The handful of "serious poker players", people who play >10 hours/week, that I've met, are lousy traders. Breakeven types. I observe that they yakk endlessly about "EV" (expected value) and they understand the concept, but they don't apply it very well in trading.
I also observe that gamblers tend not to be researchers. "Tell me exactly what to do and I will rigidly obey" seems to be their approach. Figuring out for themselves what rules to implement, is a Scary Monster. Apparently the much bigger literature of "How to count cards" and "how to play poker" (among Amazon.com's top 100 best sellers) and "how to make a living gambling" has encouraged these people not to think for themselves and certainly not to do their own research. There's always a Mason Malmuth and a Lee Jones and a (genuflect!!) Richard Epstein to tell them exactly what to do. No need to think, Marine, just do as The Emperor tells you, is their mantra.
If I were Richard Dennis looking for droids to faithfully obey my trading rules, I'd include cardplayer gamblers in the interviewees. If I were Paul Tudor Jones looking for fresh young blooded trading researchers, I'd avoid gamblers like the plague.
Posted: Sat Aug 02, 2003 3:18 am
I'm not sure if the vast majority of lower-limit players can be used as zombies to follow rules blindly. Most limit players (about 99%) do not have the patience to sit there and wait, which is a required discipline for trading (especially longer-term trend following systems.) It is more likely that they would fail because they feel the need to "get a little bit more" by picking a top, or waiting for a pullback, and that significantly decreases their overall performance.
Individual games are not serially correlated, but the turn of each card is serially correlated with respect to money management. In hold-em, you get two cards, bet, three common card flop, bet, turn card, bet, river card, bet. Each bet is serially correlated with the next bet, because proper bet sizing is dependent on current pot odds. You don't know what the next card is, much in the same way that you don't know what the next day's price movement will bring. The key is to adequately position yourself for the now to take advantage of future rises, while protecting yourself from the risk of getting hurt badly should the position go against you. This is why dynamic position sizing is very important in order to maximize "pot odds" in trading.
Having said that, no-limit is a very complicated game, with money-management being extremely important - sometimes even more important than the cards you hold. I think great no-limit players also know when a good game/hand is developing, and they can read other players. These qualities are also very useful in trading, right? I would hire and train these guys (there are a lot of bad no-limit players, but they don't last very long. The ones that are out there for a long-time are the ones who understand the concept of survival and risk of ruin.)
In golf, there are many more tournaments that have lasted for years (some more than a 100 years), while in poker, Doyle Brunson gained fame as champion twice in an event that has been held only once a year for 34 years. The law of large numbers would dictate that there would be more multiple champions in golf, especially when you include the bias that some golf courses suit better for certain types of players (power draw, faders, low hitters, deep rough hitters, etc.) In poker, the wind created by the casino's air conditioner isn't going to affect the way you play the 7-2 offsuit that you were dealt (then again, maybe it would!)
Stu Ungar and Johnny Moss were 3-time champions, while Doyle and Johnny Chan were 2-time champions. There were less people playing (as few as eight entrants) when Moss won, but Ungar won in 1997 and Chan won in 87 and 88 (more modern era wins which are significant because of the number and quality of players.) This is nothing to take away from Doyle; but when he wrote the book Super System, they figured him out and he never won again.
No-limit has always been by far the most challenging game for me. I actually lose weight in that game because I'm burning energy by constantly thinking so much. I used to play in tournaments once in a while for fun, but now I'm dedicated to trading, system buillding, and eventually managing my own fund. It's really tough to sit at a poker table for hours on end, because sometimes the only edge you have is to wait until your game starts to develop at the table.
similarites between poker and trading
Posted: Wed Aug 06, 2003 6:16 pm
Re: trading and poker
Posted: Wed Oct 01, 2003 3:41 am
TradingCoach wrote:As I was watching the 2003 ESOP on ESPN it reminded me that there is only one person Doyle (Dolly) Brunson who won the title twice (if my memory serves right). ?
The fact that you see same people at the final tables or next to the final tables for a number of different tournaments indicates that there is skill in Hold'em Poker. Just go to the tournament leaders at any online site (www.pokerstars.com
) and you will see the same people at the top of the lists. The fact the a number of these people say that Doyle Brunson's book was their initial guide tells you that good poker like good trading can be taught. I am just getting into it and enjoy it immensely. There is math, there is strategy, there is psychology, there is bluffing - what else could you ask for? Unlike trading, Doyle and others are convinced that a software program that played poker, could play at an above average level, but never at championship level. Like trading, there are all types - day traders, traders that just enjoy the "gambling high", systematic traders, intuitive traders and broke traders.
Posted: Wed Oct 01, 2003 5:46 am
I tried once or twice to play poker. Failed. Never could get the hang of it, or perhaps I could and just didn't gather any interest in it. I will never know.
As it stands today, I can't play poker. I can't even pretend to know how to play. I am that bad.
Perhaps that is why I sometimes have a draw down in my trading?
Posted: Thu Aug 26, 2004 3:22 pm
Some time ago I got interested in texas hold em. I read a book that included basic strategy. I did not try to become an expert, because i am not that interested in the game. Anyways, I made up a basic system for pre-flop (very tight). And learned some of the logic of playing the flop and on.
I then played online. It was a great experience as I learned so much about risk and decisionmaking in such a short time.
I would highly recomend it to anyone who is not a compulsive person and does not have issues with gambling or other addictions.
It was also fun because i was able to crush the online games
I felt there are so many analogies to successful trading! First, sitting there and being patient, waiting for the edge. Everyone else plays most the time, and u just sit there, losing the blinds. Second, being willing to drop out at the flop if it does not go your way, and others standing in the pot leads me to believe i am beat.
I found it very satisfying to drop out on the flop, and being able, with some accuracy, to guess what others have if they are staying in and betting the way they are.
After the flop if the pot is big, then looking at the bet I have to make in relation to the size of pot and my guess as to my odds of winning. THis can be tough if a few cards that are bad for my position come down late!!
Just like in trading, I see how so many are distroyed by hindsight!!! "IF only" thinking is i think one of the most distructive thought patterns in trading.
And, you can see this same thing in poker!! People wishing they had stayed with crap hands because they would have been lucky "that one time." then acting on that impulse, and Losing time after time again as they chase elusive luck.
What I love about it is the economic way of thinking it requires: Factoring in investment as sunk cost, Looking at the situation in terms of the expectation every time, in the current moment.
The variability is also interesting. with my tight play, I would get ground down much of the time by blinds. Then, some cards come in and Id try to get the pot as big as possible. i found on average id have just 2 or 3 of these plays a session!! a few times, NO good hands come in, so for a full session of play i just lose the blinds!! If luck smiles on you, you make a big score or two and you end way up on the session. With this simple method I came out ahead on most sessions.
Another odd thing I noticed was that you would think others would fold when a tight player starts raising. well, in big games perhaps they do. but at little games, they often do not!!! It is like they want to tempt fate and through caution to the wind!! It is almost as if i feel their frusteration when i see their crazy bets, their desire to challenge that person who is so tight. SO they give you action and on average you crush them. but sometimes they win, and when the cards are turned over, you see they had a big fat nothing before the flop! I love that because, i know that they are playing a disadvantaged game over the long run. Other time, that one card or cards you were afraid of... they end up having!!!
ONe difficulty with poker is that players have purely and 100% adversarial relationship. everyone has the same goal, which is 100% in conflict iwth everyone else. This makes it difficult to beat the house take.
Trading, on the other hand, is not this way. Not everyone is looking for profit on your time frame. In fact, some traders are not looking for speculative profit at all. Goverments intervene in markets for reason of policy and politics, and they can become contributors to the system that speculators can feed on. Think of the many billions and billions lost by govt's in the currency markets, when they try to "defend" currency pegs and whatnot!!
Hedgers are attempting to reduce risk, and as they are hedged, are not truely concerned with taking money out of the markets. They too can be net contributors. The floor Can profit off the order flow from off the floor. they locate and take out the stops that larger traders set near the market. Short term traders can profit off the swings created partly by long term traders. and long term traders profit, off the big macro swings, the hedgers, and in some markets, off of goverment contributions.
Poker has nothing like this. Trading is a Huge arena, dwarfing poker, with many divergent interests, with massively larger profit opportunity. This is why I chose to put poker aside, as i did not want to invest time in something with limmited potential at this point.
Posted: Wed Sep 08, 2004 7:58 pm
One of the difficulties I have had playing in No-Limit Texas Hold'em tournaments is the amount of "luck" present in the game. More "luck" inherent in the game than people realize. As an example, let's say you are dealt pocket aces (AA), and your opponent goes "all-in" before the flop. Your best move is to go all-in also, since you statistically have an advantage over any starting hand (except opponent's AA also). But if you lose, you are out of the tournament. Watching the 2004 World Series of Poker (WSOP), I have seen this type of situation happen time and time again. But there is nothing you can do about it, but grit your teeth, and try again next year.
In the 1970's, when there were 30 or 40 players at the WSOP, the top professional players consistently won the tournament. Now, at the 2004 WSOP, there are over 2000 players. It now becomes more difficult for the top players to win the tournament, because of the "luck" factor described above. No amount of skill or money management is going to prevent you from "blowing up" in the situation described above. I suspect, in the future, more "no name" players such as Moneymaker will win this tournament, as the number of players increase in the tournament. "Luck" will become a larger factor than skill.
How does this apply to trading? I don't know. Your comments would be appreciated. But I have always believed, as new profitable trading systems are discovered. More and more people will begin to use these systems, and the original "edge" will disappear, leaving you with a system full of randomness or "luck". Average Profit = 0, but still with Standard Deviation.
Posted: Wed Sep 08, 2004 10:27 pm
Deca wrote:One of the difficulties I have had playing in No-Limit Texas Hold'em tournaments is the amount of "luck" present in the game. More "luck" inherent in the game than people realize. As an example, let's say you are dealt pocket aces (AA), and your opponent goes "all-in" before the flop. Your best move is to go all-in also, since you statistically have an advantage over any starting hand (except opponent's AA also). But if you lose, you are out of the tournament. Watching the 2004 World Series of Poker (WSOP), I have seen this type of situation happen time and time again. But there is nothing you can do about it, but grit your teeth, and try again next year.
This is not completely true. I play no-limit often, and you are applying limit hold-em and no-limit logic to no-limit tournaments.
I can think of two circumstances where I would fold Pocket Aces, and they are both related to money management. The situation with tournament play creates a unique genre of no-limit. You can't add chips once you are knocked out - to me, survival ranks #1 on my list until I get to the final table. The other situation is with prize payout relative to position. Most players play based on their starting hand, and that is definitely the fastest way out of the tournament.