Poker and Financial Trading Has More in Common Than You Think

Financial trading. Stocks and bonds. Markets. Bulls and bears. It’s a form of capitalism that intertwines with our lives daily and, perhaps surprisingly, it always reminds me of poker. They have a lot more in common that you might think. After all, isn’t the stock market just legalized gambling?

The game changes over time in poker and trading

As far as the difference in tilt between the two professions, I think it’s actually really fascinating. Imagine you’re playing poker and you get to the river and suddenly you’re not playing no-limit Hold’em anymore; you’re playing Omaha.

The game in trading is constantly changing because the nature of the market is continually changing. Previous expectations and previous strategies sometimes can become out-dated without you even realizing it.

You’re literally playing a different game so the type of tilt that can emerge from that can be very very difficult to handle. That’s especially true if you’re a new trader, even as experienced about variances as you are in poker.

Tilt is a universal concept

If you look at tilt in poker it actually may be similar to the more subtle version of tilt that you can experience in trading. Very often there is this kind of crossover effect that happens as you shift from one domain to another or even in poker.

If you go from no-limit to limit there can be that kind of transfer that occurs. It doesn’t always necessarily show up in the exact same way.

Every poker emotion crosses over to finances

But as far as the other differences that exist in poker and trading, I actually think there are far more similarities than there are differences. I’ve observed every single type of tilt from poker in trading. The nature of the game in trading has much more variation to it so the ways in which those issues show up are a bit different, but the issues are the same.

Finding the source of tilt remains the same goal

How you’d approach long-term tilt would be in the exact same way. You’re still trying to figure out what the source of it is. It’s possible that because you’re trading at home, it’s a different story. But if you’re trading as part of an institution maybe it’s about being better behaved in front of real people. Maybe you’re not the raging tilt monkey there because you have to contain more of it.

It sort of gets internalized quite a bit more and ends up sticking around longer. Again, at the end of the day, we’re still trying to understand the source of it. I don’t think there’s much in the nature of trading that’s different from the nature of poker that’s going to create something inherently different.

Poker and trading both can involve tons of decisions

My guess would be that the typical poker player might play a few thousand hands in a day. There are a few thousand opportunities to go on tilt and also a necessity to recover from it sooner whereas my understanding of trading is you don’t make that many investments or decisions in a day.

This is why trading is far more complex and the game is different because you can have people that make one trade a month. That would be quite extreme, but they’re trying to extract max value for that trade and those are usually much more longer term ones.

Then you have people who make in excess of 1,500 trades in a day. They’re obviously very high frequency and generally much shorter term trades.

Even online poker players don’t see that many meaningful hands

I don’t think you’re going to see too many poker players, even online, make that many decisions in a day. Auto-folding hands for a trader would be the equivalent of passing on opportunities to make a trade. They’re doing that almost in every second of the day.

Actually imagine a poker player playing 1,500 hands in a day. That would be an incredible number of actual hands that they were sitting at the table for. If you’re playing 10,000 hands in a day I would think that it would be quite a lot to play 1,500 hands past the flop.

What is causing emotion-based decisions?

The frequency of your decision-making and how that produces tilt can very well be the difference in what’s causing a more subtle version of tilt verses the more obvious aggressive tilt that’s experienced in poker.

What is actually causing it? Is it some entitlement? Is it some fear of losing? Is it high expectations? Is it that you may not be as experienced in trading as you might think you are, or as successful as you were in poker?

Often times, people who have that kind of success have a difficult time becoming a beginner again. Actually making that transition to a new industry can be difficult so there may be some expectations in there. You’re always looking to better understand the source of the tilt.