Comparing Poker with the stock market

They were really talking about the business world but I feel like these same concepts apply to trading the markets as well.  So if you replace the word “business” with “stock market trading” it applies really well too.  I just took two of the Q&A that I find relates to the markets.

An interview with Poker Pro Annie Duke

Q: What poker tools do apply to business?

A: In poker, you look for patterns from your opponents, how they behave in certain situations. How do the behave when they're comfortable or uncomfortable? How do they play when they're drawing for a hand? How do they play when they have a made hand? Gather data on your opponents so you can predict what they actually have. Understand how they perceive you. It's an extremely important tool in business negotiations. Poker is really just a negotiation. If I know people are perceiving me to be too conservative, then I'm going to play in an conservative manner until they readjust their perception of me.

Q: Business leaders wrestle with playing it safe vs. taking a risk. How do you decide when to fold or go "all in?"

A: It's mathematical. I'm much more likely to be risky when the return is huge. The smaller the return, the less risky my behavior. It has to do with pot size. People lose sight of that. They want to be right. They are afraid of being wrong. It's not about being right, it's about being right often enough. If you make a $1,000 investment and the return is $10,000, you need only be right 10% of the time. Shrug your shoulders when you are wrong. Great players free themselves from the worry about being wrong.

 

In Summary Business, like poker, is not always fair. Don't get upset about what you can't control. Long-term self-interest and short-term greed are not the same thing. Watch your ego. Successes, not just failures, are often dumb luck.

Source: USA Today