I was watching a poker tournament on TV the other evening when one player knew that he had to fold. Everything about the situation (the pot odds, the fact he was out of position etc) meant that the correct decision was to fold. But rather than just immediately muck his cards, his face was contorted by anguish for at least 30 seconds, the camera zoomed in to catch every nuance of his apparent pain.
One commentator asked “Is he just acting here, to make it look like a difficult lay-down or is he really crazy enough to call?”. The second commentator answered “No, he knows he has to fold but he is just waiting for his emotions to catch up with his analysis“. Then he folded.
Press in the event of leaked NFP Numbers
What a brilliant piece of insight! So my request to the trading-platform designers is for a ‘pause button’, how much easier it would be to trade if we could take time-out to get our heads-straight before having to actually press a button that logic says needs to be pressed.
I know that isn’t possible, the market moves on without us, and often at startling speed, but I can dream (or use orders).
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November 5, 2009 at 5:42 pm
Nelson
There’s been a lot of connection made between poker and trading but for me this is the biggest one: psychology. I think what it takes to be a winning poker player and a winning trader, strategically and technically are fairly different, but psychologically the top players probably have similar behaviours when compared to top traders.
November 5, 2009 at 9:04 pm
long&wrong
One of these days I am going to write that ‘poker & trading, compare and contrast’ post! Although someone is likely to beat me to it.. http://anon-marketnotes.blogspot.com/2009/11/lame-update-interesting-links.html
November 7, 2009 at 12:35 am
ANON
Haha. Thank you for reading my post!
There are so many connections between the two that I am having trouble writing a post that makes the connections without overwhelming a casual reader (and myself, for that matter). I need to work on chopping it down into something concise (note to self: reread Kedrosky’s article on “compression” http://paul.kedrosky.com/archives/2009/10/creativity_and.html)
November 8, 2009 at 2:39 am
ANON
I just found this: http://texasholdeminvesting.com/
November 10, 2009 at 1:46 am
long&wrong
Thanks ANON!
November 10, 2009 at 9:42 am
John (aka The Masked Financier)
L&W,
A very insightful comment on the links between poker and trading and the “emotional catch up” element.
Anon,
Thanks for the link to my site.
As you will note the Texas Holdem Investing method that I promote takes the poker-trading-investing analogy one step further – to the use of poker as a tool for teaching investing.
Psychology of boredom – poker and investing
On the subject of psychological analogies between poker and investing, a major similarity that is often overlooked is that good investing, like good poker, is often a boring occupation. And this in itself can cause problems on the psychological side.
In Texas Holdem it does require discipline to sit through many bad hands since there are only really about 20 of the 169 (12%) possible starting hands that are worth investing in. Discipline needs to be maintained so the player does not make speculative bet on a marginal hand just to break the monotony.
Similarly, with investing, there is a constant barrage of news and a general impetus to act on perceived opportunities. However, the right thing to generally do is sit and wait until opportunities come along that are high quality. As with poker, the temptation is to place a speculative trade to break the monotony.
When learning to invest, playing poker can help to develop the discipline of sitting and waiting more quickly than investing, since you can get through more poker hands in a single day than you can investing opportunities.
Keep up the good work.
John (aka The Masked Financier)
November 22, 2009 at 2:29 am
long&wrong
John,
Apologies for the delay in your comment appearing, you were unfairly ’spam queued’. Thanks for the detailed response, now you just need to explain why when I multi-table the 12% all come along at the same time