At first glance, especially with people who aren’t too familiar with what financial trading really is, playing poker and trading might not seem to have too much in common. Poker is of course playing a game, although playing poker well, and especially playing it for a living, does involve some real skills and some pretty intense ones at that.
Financial trading does involve some intense skills as well, but these are understood more by the public anyway as business skills, the things you would learn in business school for instance. So one endeavor is playing a game and the other is in some sense using business analysis.
There is some truth in that, but these two fields are much more similar than most people believe. It’s not so much that poker is like business as much as it is financial trading being eerily similar to playing poker.
In a real sense, financial markets are a clearing house for “bets” that are made on various instruments. Most people think that things like stocks, bonds, and derivatives are merely reflective of the underlying businesses that are involved, for instance, if a company is expected to do well its stock price will move in accordance. There is a correlation here but only to the degree that this influences the “betting” on it, and there are several other factors that influence it as well. So looking at the underlying business conditions is only part of the deal, and not even the most important part. As well, the shorter the timeframe that you are trading in, the less this matters, and in the very short term, the one that trading often concerns itself with, it doesn’t’ even matter at all. This might seem odd but the only thing trader has to be concerned about is following the betting so to speak, which is called technical analysis, and it’s the betting that ultimately influences prices in the end, from the interaction between supply and demand.
There is a lot of analysis involved here of course but this is very similar to the analysis that good poker players use. Poker played at a high level really is taking the information you have and assessing the probabilities of various events, and that’s what we do in trading as well.
Trading does involve a different form of analysis than hand analysis playing poker though, but the two are quite similar and it is much easier to teach trading a poker pro than someone who had just studied business and had little or no experience in poker. Trading is gambling as sure as poker is, although it is not like casino gambling, it is using intelligence to skew the odds as much in your favor as possible.
However, having all the skills in the world here won’t help you if you don’t have the ability to execute your strategies properly though, and this is another thing that poker players tend to have in abundance compared to people who lack experience with this. You have to be able to execute under pressure, and trading is certainly a high pressure environment, similar to high stakes poker.
So you have to not only be fearless but be able to remain fully in control of your wits at all times, and also be able to make sound decisions very quickly. This is even more the case with trading, but poker playing can prepare you well for this, especially if you make your living from poker, having to deal with the stresses of having your very livelihood depend on the decisions you make at the table.
Top poker players also tend to spend a lot of time training so to speak, away from the table, and that plays a big role in being proficient as a trader as well. So you need both the willingness and the aptitude here and this is something that isn’t just helpful but necessary, and knowing someone has the skills to pull this off as poker players tend to do factors in heavily.
It is only fairly recently that big trading Wall Street firms have come to appreciate the strong connection between poker and trading and now actively recruit poker players. Trading is generally even more intense than poker, and of course these poker players do need to undergo extensive training to become good traders, but given that they already possess a lot of the desirable qualities, and do have a strong background in the most important ones, this makes perfect sense. There are even trading firms that incorporate poker into their training regimens for new traders, where they are taught to develop their poker skills in order to master the art of trading more effectively.
Trading is essentially assessing probabilities based upon incomplete information, and that’s exactly what poker is as well. Being able to execute sound decision making in the face of uncertainty is another hugely important trait, and one that is fundamental to both as well. So there is an intimate connection here and the skills acquired in mastering the game of poker certainly aren’t limited to just the poker table, and are transferable to business as well, especially with the business of financial trading.
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