Trading Strategies You Can Draw From Learning Poker

Financial trading is a practice unlike anything else. However, it’s also one in which you can sometimes apply lessons you learn elsewhere in life. And one interesting example of another activity that can teach you some sound fundamentals for successful trading is the game of poker.

Poker, it’s important to acknowledge, should not be regarded as a form of trading in and of itself. It’s a game, and one in which chance plays an enormous role (even if, as The Independent noted in a piece on this very subject, most players will argue that it’s a “game of skill”). Nonetheless, there are some similar ideas that go into decision-making and improvement in poker that can also apply to investing practices.

Here specifically are some trading strategies you can seize upon merely from taking up a poker hobby.

Learning is Worthwhile

A lot of people who get into poker more or less decide that they’ll pick up skills as they go. It’s not the worst thought, but the reality is that taking the time to truly learn the game will pay off in the end. A professional player on pointed out that it has never been easier to do thanks to all of the free poker content out there today — and frankly the same could be said of trading. Here too many are tempted to “learn on the fly,” but sometimes risk losing money in the process. As with poker, it’s better to take time to study fundamentals and take advantage of free learning and trade simulation tools in order to practice before money is on the line.

Goals & Limits Matter

In our post Building Up the Successful Trading Strategy in a Short Time we offered a few words on the importance of “analyzing the profit target and stop loss.” Basically this means determining in advance when you’ll withdraw a trade, either because it’s lost you as much as you’re willing to lose, or because it’s earned you what you were hoping to earn. This is a basic strategic practice that is instilled in a lot of experienced poker players. While some players certainly keep things a little more flexible, a lot of true poker experts have firm financial numbers in mind, and play the game within those boundaries. They withdraw from games based on financial strategy rather than the ebb and flow of a given game, or the vibe at a given table. It’s a disciplined approach that will benefit traders as well.

Emotion is the Enemy

This may come across as a harsh phrase in day-to-day life. But in poker and trading alike, it’s a helpful strategic mantra. Amateur poker players often find it easy to succumb to emotional swings — which can mean either reckless or over-cautious play according to mood and recent results. As players improve though, they recognize that this is a harmful tendency, and that playing without emotion typically leads to better results. The same is true in the world of trading, where an emotional response to a successful or unsuccessful venture can influence activity in a way that pushes strategy aside. This is not to say all emotional reactions can simply be avoided at will. But it’s important for traders to do as successful poker players do, and learn to set those reactions aside when making decisions.

It’s All About the Long Game

There’s a general perception that trading is about short-term gains, while investment is aimed at the long term. Some years ago, a piece at even separated the two practices by definitively setting that long-term investors come out on top “no matter what.” There’s logic to this idea, but the difference does not preclude traders from focusing on long-term gains over time. And this too is a strategy regular poker players practice. Any game of poker can result in a loss, but the good players take these in stride, mind their budgets accordingly, and seek to ensure that in the long run they’re winning more than they lose. It’s a mindset that can be applied to trading as well, and one that may just result in grater success over time.

Ultimately there are plenty of ways to learn trading strategies. Poker offers some surprisingly direct parallels however, and can be a particularly engaging way to learn some fundamental practices that may make you a better trader.