Poker and the Stock Market
I was out of town this weekend in Southern NJ, Atlantic City to be exact. After finishing my business at the convention center, I traveled back to the newest casino, the Borgata where I was staying for the night. I don’t consider myself a gambler and have never enjoyed losing money at the tables. When I do gamble, my preferred games have always been craps and blackjack. Until recently, I had never played at a poker table in a casino environment but I enjoy the game of poker and have only played in backyard and basement games with old buddies. Many people consider the game of poker pure luck but this is not an accurate observation. Many factors run parallel with the game of poker and the game of stock market investing. Luck may play a part but rules, odds and money management are the largest components of the two entities. When investing in the stock market, it is essential to have a sound set of rules or a system that has been tested in real time, no back testing or historical testing needed. After the system has been tested, the investor needs to follow rules in order to preserve capital and cut losses. The investor must also consider the odds of his/her stock making a gain or making a loss. Price objectives and targets should be a large part of every investor’s system. With proper money management and calculated expectancy, the investor should aim to trade only in situations where the odds are in his/her favor. In a strong bull market, it may not be wise to start shorting many stocks; the odds of making a big gain with this strategy could be very low. Another major component that works its way into investing is psychology and/or human emotion. Stocks are made up of human character traits, similar to the type of people that own them. Some stocks are risky and volatile while other stocks are conservative and predictable. The market repeats cycles and specific chart patterns because humans repeat their actions and character tendencies. Now, back to the poker table; as I sat down and started to play, my first goal was to become familiar with the character traits of the players around me. With 10 players at the table, I had plenty of time to evaluate the people I was playing with, without risking a great deal of money. After several rounds of play, I was aware that the gentleman to my right would only bet high odd hands and would fold every other hand. He was very edgy and nervous and folded his cards with force when he was angry. The gentleman to the left would also play hands with high odds but I did see him call bets with some hands that were risky with lower odds. One gentleman across the table was the bluffer and always had a smirk on his face with a pair of dark glasses. I challenged this man on several occasions and paid to see his cards because I felt he had nothing. More times than not, I was right and still beat him with an average hand. I could go on but you understand the point I am trying to make: all poker players and investors bring their emotions to the table. I won’t get into the exact rules of playing poker but I can tell you that only two players are required to bet per round while the other eight can view their first two cards without risking a cent. My game of choice is Texas Hold’em, the current craze across the country and one that excites me when I am in the environment. The two players required to bet represent the big and small blinds. If you are the dealer or anoy other players at the table, you can view your first two cards for free without an bet. If the hand is weak, you can fold and keep your gambling stake. Here is where it gets interesting; if I have a decent hand, I can decide to call the larger blind and see the next three cards on the flop, which is still a low risk investment. If the flop doesn’t provide me with the cards I need, I can immediately cut my losses short by folding and wait for the next game. The same is true in investing; I can cut a loss short and wait for the next opportunity without risking the farm if I realize an immediate loss. If the cards are good and my probabilities of winning the hand are high, I can call the bet or raise the bet. A fourth and fifth card (the turn and the river) are placed on the table after the flop and betting continues with each round. Again, I can decide if I would like to call, raise or cut my losses short. The connection I am trying to make with investing in the stock market and playing poker relates directly to cutting losses short (capital preservation and money management) and my odds of winning the game (in the stock market this could be called expectancy). In my opinion, the best game to play at the casino is $1-$2 no limit style. This means that the blinds are held to a minimum and it will only cost you a couple of dollars to see the flop in many cases. The “no-limit” aspect allows your upside potential to be unlimited which carries through to investing. If you cut losses short and ride your winner, the up-side potential in investing can also be unlimited, especially when using options (but that is for another discussion). Last night, I could see my first two cards for free, eight out of every ten hands and I could fold if they were no good. If they were good, I put money on the table after my idea. In the real world, the world of stock investing, you should always put money after your best ideas. The ensuing gain or loss will tell you if you are right. Again, for the umpteenth time in this article, the most important part of both games is cutting losses short and moving on without mixing emotions into the decisions. All investors and poker players bring emotions to the table, some people control them better while other people employ better systems and understand the odds on a higher level. The bottom line is to understand the situation around you and to use a sound system to raise your odds. Never bet a hand that represents a low chance of winning and never ride a loss that could multiply overnight. Cut losses short and get out of the game and wait for the next opportunity because they are always around the corner. Chris Perruna - http://www.marketstockwatch.com Chris is the founder and president of MarketStockWatch.com, an internet community that teaches you how to invest your money with solid rules. We don't stop at just showing you our daily and weekly screens, we teach you how to make you own screens through education. Through our philosophy, you will be able to create your own methods and styles to become successful. |
Other Trading System Articles
California Car Wash Fundraisers and Environmental Law Many non-profit groups are feeling upset that they are allowed to do car wash fundraisers in some California Cities. It is not that the government officials are against your groups raising money, it is that they worry where are the soapy dirty water is going. It is a problem and it might be good for you to understand some of the history behind t ...Las Vegas Wedding - A Dream Comes True Weddings are an important occasion no matter which part of the world you are, or which culture you belong to. Years of preparation, hours spent, lots of small details to be checked. That is all necessary if you want to have an average Western wedding.But when we talk about Las Vegas, things change. The luxury of the city makes things a ...Retail Brokerage In a 2001 report published by Celent, a firm that is concentrated on the implementation of information technology in the world pecuniary assistance sector, it showed that retail brokerage in North America may be down but definitely not passé.The said company has two primary offerings namely research and consulting. Research takes place wh ...An Insider's Look On The Mazu Business Pack Have you herd about the mazu business pack? If you are reading this article I am sure you know a little bit about it. If not I am going to tell you exactly what comes with the mazu business pack, and why it is one of the top home business programs on the Internet.If you are someone that is looking to work at home, and are tired of ...Crude Oil - Big Profits Are Being Made Are You Being Left Out? Have you missed out on the recent huge move in crude oil? If you have and you are wondering if crude oil will stay high then this article is for you.Here we will outline the factors driving crude oil prices and how you can get involved and make huge profits, even if you have never traded before!Black goldThere remains no via ...How to Evolve a Financial Success System More often than not, people associate success with money and wealth. While that is a lopsided view of success, it is true that success often brings with it financial rewards; it is also true that many people who aspire to success are thinking of the financial rewards that will follow when they succeed. But what if your idea of success is purely ...Economic Survival in the 21st Century - the Three Key Questions to Ask In this “special report”, I want to pose a few important “philosophical questions” to my readers. Firstly -- our Federal Reserve Chairman, Alan Greenspan, addressed the effects and implications of our aging population on things such as Social Security again in a ...How To Construct A Professional Proposal A professionally prepared proposal is an essential part of the overall sales cycle and is often the only way some members of the customer’s decision making unit (DMU), find out about you, your company and your proposed solution. If you fail to adequately represent what you have to offer, all of that time invested in first locating the opportunit ...The Top Ten Management Failures Over the past month I have been reflecting on the topic of organisational management. I am surprised by the number of organisations that survive perhaps through the benefit of their size or monopolistic position even though they exhibit some of the very worst management traits I've experienced.Some corporations like Enron, HIH and WorldCo ...Trading with Root Cause Analysis If you have read my article on Pareto charts this will probably make more sense to you.Root cause analysis is another tool that traders could benefit from. I know that some of these things do not seem trading related, but you can improve results with them. When all is said and done results are what matter anyway.On your pareto char ...America - From Freedom to Fascism - A Movie by Aaron Russo OK, I'm being a little melodramatic. Maybe it was the reaction of the audience or maybe it was the standing ovation in the over-filled-to-capacity auditorium; but I got a little choked up by the 90 minute screening of a new documentary called "America - From Freedom to Fascism". The movie was shown for free at Adirondack Community College in Que ...Are These Simple Trading Mistakes Costing You Money In The Forex Market The 2% rule is a powerful tool in Forex trading. By adopting this rule you’re using a strategy that decreases the size of your losses during losing streaks, an important consideration. There is, however one small caveat that you need to be aware of when using the 2% rule to calculate how many Forex shares you are going to buy. As you know, the n ...Commodity Investing – Targeting 30-50% Annual Profits There are plenty of people who will manage a commodity investment for you, but you need to choose carefully as most lose!This article is all about picking a manager or doing it yourself via a software program and targeting the big gains that make commodity investing so lucrative.Risk & RewardCommodity investing by its very n ...Dropshipping - Can You Use It on eBay in the UK as Well as the USA? If you are interested in selling on eBay, you might wonder where you can get items to sell. I’m talking about after you’ve exhausted the logical first places, such as items in your garage or loft or spare bedroom!One of the drawbacks for anyone wishing to expand an interest in auctions into a business – be it part or full time - is the ne ...A Forex Trader's Biggest Enemy The biggest enemy to most forex traders is not the market or their trading system but the use of leverage. When using too much of it, most of times it will take your account serious down, even with one single trade.Last week, a new forex trader showed us his account statement and asked what he was doing wrong. After taking ...Choosing A Forex Trading System – Part 6 In our last installment we discussed the super-important performance measure called maximum drawdown. Today I have another measure who’s importance may not be immediately obvious to you. That measure is the actual length of time over which the trading systems results were achieved. Some of you may identify this as the length of the trading syste ...Stock Market Trading The stock market offers various opportunities for trading. Apart from the main securities, which one can trade on various exchanges like the New York Stock Exchange and Nasdaq, there are other forms of trading like forex trading, currency trading and ‘contracts for difference’ also known as CFDs.Stock market trading normally involves open ...FOREX Online System Trading- For Bigger Profits The rise of the Internet and cheap powerful computers has made FOREX online system trading a reality for any trader, novice or pro.Now its possible for individual traders to manage their funds and target 30 – 50% annual compound growth.The advantages of FOREX online system and how to choose a good one are outlined in this article. ...Lactose Intolerance: What Is It And How Is It Diagnosed? Lactose, commonly known as “milk sugar”, may not be digested well if you are either born with absent or low levels of the enzyme lactase or if your intestine has been injured resulting in absent or low levels of lactase. Lactose is a disaccharide or two sugars linked. It is a combination of the two sugars, glucose and galactose. If intestines la ...Get Rich with Arbitrage Trading Is it true that you can make money using Arbitrage Trading? Yes it is true because I am living proof. I use this amazing arbitrage trading software surebetpro that allows me to find arbs faster, and easier increasing the speed at which I can make money.Hi my name is Chris Rohrer I am only 21 years old and I make over $1,000 ...The Russian Marriage Agency From Hell If she does not speak English, you can usually arrange through the local marriage agency to have a translator on the call. This may cost you ten to twenty dollars per hour, but at least you will be able to converse with each other.Other resources are local universities that have university students who are studying English. Usually their ...Commodity Trading – Make Money Fast In 5 Simple Steps This article is all about trading commodities for big profits and how to make money fast.We will outline the best method and the best commodities to enable you to have big profit potential, so let’s get started.Commodity trading covers a variety of areas including currencies, stock indices, energies bonds and a variety of soft comm ...Forex Trading Courses - What Can I Expect? In a market where trade in foreign money is up to two trillion dollars a day, a good Forex trading course can be very beneficial. Part of the reason a trading course is a good idea is because only five percent of traders actually make a profit on a consistent basis. This is has to do a lot with those who decide to get involved in the Forex marke ...Utilizing Trading Software in Forex market Today's Foreign Exchange (Forex) trading is recognized as one of the lucrative ways in making money online. To trade Forex, all you need is just a computer with Internet connection and an account with Forex broker. As the market is operating 24 hours a day (for 5.5 days a week), Forex traders are basically work freely regardless on the location ...Make Money Fast – Part 2 Your Million Dollar Trading Method Revealed! In part 1 we looked at what you need to prepare yourself to make money fast in trading. In this article we will reveal a trading methodology traders can use to make huge gains even if they have never traded before.This method is simple to understand, easy to apply and you will see exactly why the logic works.It can be applied by an ...12 Basic Stock Investing Rules Every Successful Investor Should Follow There are many important things you need to know to trade and invest successfully in the stock market or any other market. 12 of the most important things that I can share with you based on many years of trading experience are enumerated below.1. Buy low-sell high. As simple as this concept appears to be, the vast majority of investors d ...
|
