Similarities between playing poker and trading the market

The psychology of playing poker and trading the markets share many similarities

I have always been amazed at the similarities between playing poker and trading in the markets. Here I share some observations which I hope traders will realize.


From, I found an article about key poker skills and I post a few of them here:


In order to win steadily at poker, the most important skill to master is discipline – in fact, all other skills are dependent on discipline. You must have the discipline to wait for a good hand, a good game, the right opportunity, etc. Discipline means you do not play in games where you lack edge; you refrain from playing hands that will get you into trouble; you manage your money expertly; and you learn from your mistakes.

This is an aspect that new traders lack when they have just entered the market.

They over trade and do not discern their odds of winning. They take trades even if the risk are high and rewards low.

They chase prices and end up buying high even in situations when prices are over-extended for example, move too far away from the base.


Money Management

If you are unable to manage your money it is impossible to be a steady winner no matter how good you are. Money management means only playing in games you can afford and knowing how much you are expected to win in the long run. The reason that so many skilled players go broke is that they constantly play at limits that are not supported by their bankroll. There will be times when you are just plain unlucky for a longer period of time though you are playing well. You must have a bankroll large enough to handle these expected swings in poker.

Many stock market players become ‘specu-vestors‘ or overuse credit:

They originally want to speculate on share prices but once price turns against them, rather than take loss they decide to keep their shares. People who do this end up having a portfolio of losing stocks.

Some take a step further by converting their bad stocks into collateral for financing. This will give them ‘more fuel to throw into the fire’.

Ultimately, specu-vestors will go bust. They end up holding bad stocks. They also have tremendous opportunity cost because when good stocks are moving, the specu-vestors may have run out of cash to bet.



Are you sure your psychology is on the right game?


From, I found some ‘Common Beginners’ Mistakes’ too:


Mistake #1: Playing too many hands (over trade)

When people sit down in a game, they want to play. Often, this means they even will play hands like J, 4. This is a cardinal mistake.

Newbies do not realise that in an activity like investing/trading, longevity is more important than participation in every game. This is because if you have no more money, you can’t bet. Newbies want to play every game because of greed. The adrenaline goes into their body system and they get a tremendous emotional ‘kick’. Perhaps traders like this are getting what they want i.e. the ‘kick’. So winning becomes secondary.


Mistake #2: Playing above your bankroll (over leverage)

This goes without saying. Sometimes the gambling and money aspect of poker gets to people too much. They become greedy and play in games they cannot afford or games where the competition is simply too stiff. At first, stick to a consistent, low limit. Learn how to play and beat the game before you play in higher-stakes games.

I hear traders losing their pants through margin calls and forced sells. Playing excessively is a sign of a newbie. Market veterans know that there is no sure win and therefore making calculated bets with small amounts of capital per trade over long is a disciplined way of collecting consistent profits and compounding the whole basket. On the other hand, newbies focus on how much they want to win every time. They don’t realise that sure they can win a lot but also lose a lot. In the end, the outcome becomes very volatile.


Mistake #3: Becoming too emotional at the table

Bad beats will happen. Losing sessions will happen. Annoying opponents will happen. Live with it and do not let your emotions sway your judgment at the table.

What’s more to say? These are forces of the dark side: greed, fear. People ruled by these emotions do silly things.


Mistake #4: Imitating other players

A lot of people learn how to play poker by playing in a fashion similar to other people. They may just imitate others at the table, or they may try to play like a professional they saw on television. This is the wrong way to go about playing poker. Many people who play poker are simply bad at it. Imitating a poor player means copying a lot of their bad habits.

Furthermore, trying to imitate what one saw on television is also a recipe for disaster. What is shown on television is almost always a tournament, and their hands are highly situational. The reasons for the professional’s decision probably has little applicability to your own game.It is important to understand how to make decisions at poker. Succeeding at poker is not done through imitation; rather, it is done through understanding the complexities of the game.


Blindly following others

In my opinion, folks who show this sign shouts ‘sucker’ and ‘loser’ all over. Blindly following others subjects oneself to manipulation, misguidance, fraud etc.

When newbies pick up trading ideas/tips, advice from ‘gurus’ in trading forums, they must ask themselves the following questions:

  • What is the agenda of this guy? Why is he giving me a free tip? Does he want me to buy so that he can sell out of his losing position?
  • Can I follow this guy’s advice? Is he making a qualified recommendation? How can I verify?
  • Even if he was right, is my risk tolerance the same as his? Can I afford the same position as his? How long does he intend to hold?


Success is determined only by yourself

At the end, the similarities in poker and trading lie here too. Success is determined not so much as which strategy but the determination and discipline by the trader to carry out the plan. Recall:

“the most important skill to master is discipline – in fact, all other skills are dependent on discipline.”

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3 thoughts on “Similarities between playing poker and trading the market”

  1. Gibson says:

    wow cool…

  2. Michelle Chia says:

    Out of the 4 mistake u listed out, I have made 3. lol

    Mistake #1: Playing too many hands (over trade) – When I just started trading, every trades to me seems possible. so keep entering.

    Mistake #3: Becoming too emotional – chase trades, revenge trades. Somehow is link to mistake #1.

    Mistake #4: Imitating others – ended up I became confused.

    Now I have learned from mistake and doing my best to avoid. The last part is so true – [Success is determined not so much as which strategy but the determination and discipline by the trader to carry out the plan.] But IMHO, I think a good strategy helps too.

  3. Josh Chiew says:

    Indeed trading and playing poker has many parellels. Your article is spot on.
    In poker like in trading, you must always know where you are at. It’s a skill that can be honed and refined.
    Sometimes in poker you can get a bad beat just like a trade that doesn’t pan out as expected. You just have pick yourself up, dust it off and soldier on.
    Whether waiting for the right hand (patience for high probability trade), reading the opponent(trade analysis) or simply tilt control(trade psychology/money management), your edge lies in having the conviction, self-belief and of course discipline in carrying out your plan.

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