How do the same professional poker players find themselves sitting around the same final tournament table each year? Do the good cards naturally fall into their hands? They must be luckier than the rest of us. Or, can we learn a few things from these professional card players? Below is a list of skills that these players have that could transfer to any stock and option traders.
Ability to adapt is a skill that is necessary to a poker player, as well as participants trading in the stock market. Conditions change and hundreds of new factors will cause the topography of markets to change. Knowing how to navigate the new and ever-changing landscape is essential to successful trading. Simply put, trade the trends. A trader’s ability to observe market conditions when trends change and adapt to these new conditions is the key to success. Holding to old beliefs after markets have changed is the best way to lose money. Be flexible and have the ability to adapt when conditions change.
Varying the size of your bet can help put the odds in your favor. Placing larger bets when using higher-probability strategies or when conditions mathematically are in your favor will allow larger size wins when you are right and can help pay for smaller losses when you are wrong.
Emotional control is essential to investing, like it is in professional poker. Trading is a long-term battle. What happens in a single trade is of little meaning to your portfolio unless it causes the trader to give up. Focusing on your goals and eliminating your emotions when making decisions is crucial to success. Of course, it’s easy to be happy when right and sad when wrong, but making decisions should be void of emotions. Trading plans can help overcome emotions and keep them at a distance. Following rules can minimize anxiety and the feeling of being out of control.
Attention to detail is the last skill we’ll discuss. Poker players are like sponges; they watch everything. Every bit of information they can obtain from what each player does with the cards dealt, to how much money every player has, to which players raise and which players check, is important. Like poker players, we should know the markets and sectors, current market conditions, market cycles, and how the market behaves at each level of support and resistance. Traders should be students of history. In the end, we absorb all relevant information, focus on what matters most (trends, reward and risk, and mix of bullish and bearish trades) and ignore the less important. Trade your plans and follow your rules, and you will feel more confident having a systematic approach to the ever-changing market. There is much to be learned from these professional card players. As we develop their skills, we will be prepared when we find ourselves and our portfolios sitting in the big game.