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Trading and Poker – Parallel Universes

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You don’t have to be around the trading world for long before you’ll hear a poker reference or several. There’s good reason, while they are 2 unrelated disciplines in practice, the important aspects of the game behind the game are fairly parallel.

As someone who is a recreational poker player but did invest the time to study the game and has played for years, these ring true. If you know nothing about poker, they may be of interest but not really be felt to the core.

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Bankroll Management – Capital Management

This is a very direct relationship between poker and futures trading (or any trading). The amount of money you have in your account to actively buy and sell shares, contracts, lots, or other is your bankroll. It’s what you use to make more money. It shouldn’t be thought of as money that can be taken out for every day spending. The goal should be to build your bankroll, and move up in stakes (poker), or in trading, build up your capital, and increase your lot size.

As well, having a bigger bankroll doesn’t by default mean you have to move up in stakes. You could double your poker bankroll and continue playing $1-$2 hold’em because you don’t yet feel comfortable taking on $2-$5. Not only do the stakes increase, but the quality of player. Likewise with futures trading, you don’t have to put on more size because you can. Stick with what is comfortable. Unlike poker though, the game is always the same game. If you trade the treasuries, there aren’t different levels of trading treasuries. There isn’t a treasury market that only allows people who trade 20 lots or more to participate. Anyone can trade any of the markets.

Hand Selection – Trade Selection

In poker, you choose what hands to play and in trading what trades to take. You can sit there all day at a poker table and not play 1 hand. You aren’t forced to participate. Likewise in trading, you can sit all day and if you don’t see a set up you like, don’t take a trade. The analogy breaks down a little because in poker you do have to pay a fee to sit at the table (blinds and possibly antes). In trading, there’s no fee to sit and watch all day. I guess you could technically call your data feed a fee – you pay monthly to get the data to watch the markets. But it’s relatively insignificant in the big picture.

Going On Tilt

Going on tilt is when you have some event or series of events that put you in a sub optimal state for playing or trading. There’s several types of tilt – in the end they all put you in a position where you won’t be trading at your best or playing your best game. Imagine seeing the perfect set up, and you go long. The trade starts to move in your favour and you feel justified in your position. Then out of no where, the market spikes against you and what was a small winner and growing becomes a quick larger loser. Or maybe several trades in a row your stop price gets tagged, you get out for a loss, and then immediately the market turns around and runs in the direction you thought it would. Frustrating after awhile for sure.

The same happens in poker. You have 2 aces and already have an advantage, mid hand someone shoves all in and you think this is a dream scenario, they turn over 2 7’s, and of course a 3rd 7 comes out, giving them a better hand. Possibly a poor player just keeps beating you, getting lucky with hitting poor hand selections on their part with winning hands. Imagine instead you have 2 aces and someone shoves all in, you call and they flip over a 2 and a 6, a hand no one on earth should be playing. And the cards come out 2-6-4-K-J. They made 2 pair, and beat you. With a hand they had no business playing. Tilting.

This article is more about the parallels and now how to fix mistakes, but going on tilt can lead to big losses and negate all the hard work you put in up to that point. Learn how to mitigate going on tilt, and recognizing when you are on tilt and how to get yourself out of that state.

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Ebb and Flow Of Winning & Losing

There’s an ebb and flow to winning and losing in both poker and trading. Some days you are just on, you can do no wrong. You keep getting big pairs and suited connectors in poker, and winning those hands. In trading you go on a streak of winners, and a few even run much further than you thought they could.

The same happens with losing though. You can’t catch a break in poker, you either keep getting horrible cards, or the cards that are playable don’t turn into winning hands. In trading, the market isn’t really setting up nicely for you, and the set ups that did happen turn against you.

Winning and losing streaks can happen intra day, intra week, intra month. To be good at either poker or trading, you have to learn how to lose. How to deal with the sustained losing streaks, whether it’s in the same day and you put up 4 losing trades in a row, or you have 4 losing days in a row.

Folding When Losing – Exiting When Losing

In both poker and trading, as the gambler himself Kenny Rogers says, “you gotta know when to fold em”. If in poker you are in a hand, have already contributed to the pot, but the cards coming out don’t improve your hand and you have ever indication they helped your opponents and are probably in a losing hand, you need the discipline to fold and move on. Likewise in trading, if the trade is against you, “hope” isn’t a good strategy. You need to re-access the situation. You entered the trade for a specific reason, and if that reason no longer exists, it’s time to get out and move on. Would you have won the hand, or turned around and become profitable? Sure possibly. Some percentage of the time it would work out. We are in the long game though, and statistically over time those are losing plays to stay in the hand, or hope the trade turns around.

Hand Strength Changes – Trade Strength Changes

In poker your hand strength changes with each card that comes out. Even before that, the number of people involved in a hand will change your percentage chance of having the winner in the end. Each event that happens after the hand starts changes things. You have 2 aces and the flop comes out A-A-5, good chance you will have the winner, and now your focus is on how to get your opponents to get the most money in the pot you can. In trading, you go long 2 lots, the price spikes up already above any profit level you were hoping for, so you scale in for more contracts, and the price continues to run. You adjust what your actions are based on how your hand, or trade, strength changes good or bad during the action.

Isolation For Online Players – Retail Traders

For online poker players, you are stuck in front of a computer for hours on end, playing the game. You don’t make money unless you play. For at home retail traders, you sit in front of a computer for hours on end, trading the markets.

Both of these can lead to isolation. There’s no office banter. Also, there’s no poker table chat. There’s no trading room. To be successful as an “at home/home office” type of player or trader, you need to be okay with this. There are ways to mitigate the isolation – chat rooms, group trading, social media, or just being okay with isolation while “working” and get your socializing in others ways.

It can be tough though. There’s no one there to celebrate that all time high poker cash, or that all time high profitable trade. People think money will make it not matter, but for most people we need more in life than just money.

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The Long Run Is What Matters

Somewhat related to the ebb and flow mentioned above. You can’t let a losing trade, a losing day, a losing week defeat you. You are in this for the long run. In poker, you’ll have plenty of losing sessions. If you are a tournament player, you’ll lose a whole lot more tournaments than you win.

This is why I track all my trading stats. If it is a bad day, I know that in the long run I’ve proven to be profitable, and I have a pretty good idea of my expected outcome, on average, over time. One loss does not define you.


There are even more parallels between poker and trading. You are in a job where you set your own hours, dress how you want. You need wicked discipline in your craft. There’s very few successful poker players and very few successful traders. There’ll be highs, and lows. There’s no steady pay cheque. On top of all the items mentioned above.

If the above though sound like perks of a job and not bad things, hey maybe you have a poker player or futures trader inside you waiting to come out! You can check out my recommended futures trading evaluation companies here.

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