simularities between poker and shares trading on the stock market

This thread is fo a discussion between the simularities between poker and shares trading on the stock market.

It is provoked by a recent Bussiness Studies Class that I had. In the class the Teacher was asking us to give her different possible sources of income such as wages, sponsorship, royalties etc. and ofcourse trading the share market. I piped up and said poker/gambling as a possible source of income. The teacher immediately said that gambling could not be considered a legitimate sorce of income. Funily enough she said that was the end of the matter and didnt give a legitimate reason that it couldnt be considered a source of income. The reason she gave was "it's a recreational game played for fun".

I then proceded to point out that Shres Trading has just as much if not more risk involved than poker does. I said poker was a game of probability where players used information provided to make the best mathmatical decision possible and in the long run the players with more skill would win more money because they would be more often capitilizing on their opponets mistakes while make less mistakes of their own. Which is much like Shares Trading where the people who make more money than others are considered better traders because they are better at spotting trends and predicting what the trends will be so that they know when to buy or sell shares.

I then went on to say that Shares Trading(with my relatively limited knowledge of shres trading) is probably less of a exact science than poker. Beacuase Poker is a game of probability and the probabilities never change. In poker if you always get your money in HU with a greater than 50% chance of winning then you will over the long run be a winning player. Wher as in Share Trading there is virtually no garentee that you will profit and you are in much less control of the outcome of your investments in Shares Trading than you are in Poker.

I came online tonight and found a few good links about this topic. What i want CC to help me with is any good points i have missed about simularities between poker and shares trading on the stock market.

Here are the links to articles i found:

Making Money On The Stockmarket: A Game of Poker
A Big Deal

For what it's worth, there is no way I can lose money as fast in poker than my last broker did in the market....

My understanding is that dividends from shares could be considered to be income, but as prices of shares can go up or down the trading of them is effectively gambling too. I have made quite a lot of money since last April doing matched betting, but a lot of people (including my wife) have a very sanctimonious attitude towards it, mainly because they don't really understand what it is... I would guess that it's the same with poker, too

I think that is a major factor in the disagrement. My teacher was most likely raised(like the rest/most of her generation)to see poker as a shifty backroom game played by criminals etc. and she also knows alot more about Shares Trading than poker.

Sometimes you cant change peoples opinions, even when they are wrong.

Well this deep-rooted "fear" of gambling seems to go right back to Victorian times, in the UK at least...

It seems that traders do fairly well in poker from what I've seen so it's likely a similar skillset. I know someone who used to sell options and talked to him a fair bit about it, and he told me outright that many of the same skills used in his work were similar to poker skills and that I should get a job there.
He unfortunately left after he lost quite a bit of money that he had outlaid when 9/11 sent stock prices tumbling as much of the money he put up was his own. That did get him interested in fractal models for analysis and are really quite interesting.

AlexeiVronsky and all,


Agree a lot of the same skills are used.

Especially the discipline required and emotional

Unattachment necessary
donvic

Hardly seems an appropriate job for a stalwart of the Russian Revolution

Risk is the same in the sense that you can lose all your money, but in the Market you can exponentially increase your money without doing a thing. You're not gambling or needing to get "lucky" every other minute or hour when picking the right stock/mutual fund. You say poker is a %50+ probability of winning a hand and this will make you a winning player, I'd have to say that's not accurate. If so, %50+ is not a great probability anyway. The stock market is a more solid investment IMO when you're in long-term. Day-trading is a different story. You also have more complete info in the market and when making your decisions. Frankly I don't think gambling/poker is all too comparable to investing with a diversified portfolio. Maybe a slight bit because of the U.S. slumping economy, but you can always short stocks. Invest in Disney NOW!

I am refering more to day trading, long term its the same in poker, over the long long run say 200k hands a player with more skill than his opponents will win money. And long term trades are morelike the long-term in poker.

I'm not saying it's similar in every regard, but the risk/return analysis is similar you make a hand valuation or a stock valuation and you determine what percentage of your money you're willing to risk on it for the estimation of the reward. My rate of return on poker is far higher than I could expect playing stocks (about 290,000% net return over about 4000 hours of actively playing, though recently I've been playing smaller stakes as I just started playing a lot again recently so the rate used to be higher) you can also use portions of your bankroll that you're not likely to immediately need for other investments concurrently. You just have to make sure that it's easily easily liquidatable if you need to draw on it to play a bigger game or go on a cooler.

Didn't say I took the job, I had to take the romantic route.

There is a definite risk/reward similarity between poker and day trading, options, ect. Both require skill to produce consistent winning results and if one is skilled neither is really gambling in my opinion.

Another similarity I see is that both require attention to detail in order to anticipate future trends and conditions. They both also require some math skill. However the better you are with tracking trends the less you need to rely on math.

One similiarity between playing poker and trading stocks : online poker player's ability to massively multi-table (probably with a few monitors for some players) AND the trader's ability to look at many different monitors at the same time.

Can that be an edge for the new age online players?

Great article... One of my favorite

tyvm for the compliment.

Is it your article `?

^^

The OP is my own words, i did however use the articles linked as backup to my argument.

So the OP is my article, the links are linked to other peoples article.

The OP is originally posted on my blog. Found here.

The reason why I like this article is because after I had read it,

I understood that I was using what I have learned in the stock market and was applying that into my poker play.

And I dont think my bussiness class teacher would like that comment either, but who nows .

Oh ok, glad you enjoyed it.

Peter Lynch, the legendary manager of the Magellan Fund, once said that one way to become a successful investor is to "learn how to play poker."

I actually think that as a general rule, a good set of poker skills will win out (in terms of making money) over a good set of trading skills. I think that if you are a decent poker it is more stable than day trading, and actually about the same as a sit and wait approach in investing. If you are willing to take the big hits that can come with the market and you don't touch your money, it SEEMS like the market will usually rebound, but you never know what will happen to the US or the economy. Is your teacher familiar with the Random Walk theory? "A Random Walk Down Wall Street" by Burton Malkiel? I would imagine that she is, and if so I would bring up the study in it where darts thrown at a list of stocks, yes literally darts, outpicked some top investment advisors. She sounds close minded all in all, maybe tell her I said so and get her to ask some top pros if they don't think they are making a living off this recreational game...

I've heard of the darts outperforming top picks, but I would guess that's in large part because of the way that people choose stocks. People are generally looking for lower risk higher return investments. Chosen at random you're likely to get much higher variance, either positive or negative, which should likely correlate to the direction the market is moving in general.

That's a lot of the reason why tracker funds have become so popular in the UKSurely lower risk and higher returns tend to be mutually exclusive?

We know that a good stock trader is most likely to be a good poker player.
Does anybody know a successful pro poker player or players who later become a successful stock trader or traders?
I mean know him or her by name.

If I'm not mistaken Dan Harrington is a stock broker of some sort.

At the final table of the main event when he took it down he offered a deal after every elimination, even offering free investment counseling to all other players, promising fortune to everyone, though everyone always disagreed since it was a once in a lifetime chance to play for $1m

Didint Dan Harrington go to College and study stock/share trading and that sort of thing with Bill Gates, the also both learnt poker at college.

Very nice articles. Seriously, there are many similarities between almost any two things that you can think of. Once you begin to understand this concept, you can begin in importing and exporting all your knowledge to and from your game.