Home Investment 5 Skills Traders Can Learn From Poker

5 Skills Traders Can Learn From Poker

by Lois R. Earles
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Real-money poker is sometimes compared to various forms of trading or investment. And while responsible experts on both sides will stress that poker should not be considered an actual form of investment, the comparisons are easy to understand.

Fundamentally, both practices revolve around the idea of using strategy and predictions to grow funds, be it by investing in precious metals, forex trading, or even bitcoin. Because these similarities exist, there are some things traders can learn by playing poker — even if they shouldn’t consider poker to be a type of trading.

1. Cashing Out at the Right Time

To a certain extent, both poker and trading are all about cashing out at the right time, so as to maximize gains and minimize losses. The only problem is that a lot of people don’t pay very close attention to that second part! As another article on what investors can learn from poker players put it, it’s important not to be more willing to walk away with gains than a loss. This is something a lot of poker players learn the hard way. It’s frustrating to lose chips (and money), and thus tempting to stick around to try to win them back.

Similarly, a bad day of trading leads many to keep going to try to reverse their fortunes. Successful poker players and traders alike, however, ultimately learn that they need to be willing to cut their losses and walk away. Being willing to walk away only after making gains is a recipe for compounding losses.

2. Resisting Rising Value

One interesting thing we’ve made note of in past looks at stock market psychology is greed, and how it can actually backfire. While most anyone who is playing poker for money or trading in a financial market is doing so with a degree of greed, taking this idea so far as to begin chasing rising value is often a mistake. Poker players actually tend to learn this quite quickly.

Once a chip stack is mounting in the middle of a table, and the amount of cash at play in a given hand is beginning to mount up, strategic players know to be careful — unless they have excellent hands. This teaches a degree of restraint that a lot of traders would do well to embrace. All too often, amateur traders, in particular, see assets rising in value and buy-in after the fact, only to find themselves in precarious positions when early investors start selling out.

3. Diversifying Opportunity

When you think of somebody playing poker for real money, you probably envision a professional with a low baseball cap on, fiddling with a chip stack in a Vegas casino. That’s certainly one version of real-money poker, but most serious players — including those same pros, in their spare time — will actually play a bunch of games and tournaments at once through online platforms.

Poker players learn that by playing a dozen or more tables at once, they have more opportunities to make gains, and no single game is likely to hurt them too badly. They also have more options to choose a different poker game, which is one of the top tips to take your poker game to the next level. This is essentially the same logic as that of diversifying a trading portfolio, which makes this another good lesson for traders to learn from the poker tables.

4. Assessing Emerging Assets

While this point is a little bit more specific and less general, it’s one that’s been borne out over the years. Poker, at least with regard to technology and payment methods, tends to be something of a trendsetter. Many poker players, for instance, could likely have predicted the rise of payment processors (like PayPal) years ago, because online gaming platforms were among the larger companies to be early adopters.

Of late, talk of cryptocurrency in poker is somewhat similar, so much so that one could imagine certain cryptos soon making their way into the game in a way that gives poker players an early look at their utility and value. There may not be a ton of other examples, but even these demonstrate that poker players learn to assess emerging assets through close examination, use, and familiarity.

Traders won’t always get the same luck, of being involved in industries that showcase tech or assets early in their emergence. But there’s still something to be said for learning to assess new assets in a hands-on manner.

5. Making Decisions Without Emotion

The idea of taking emotion out of trading is perhaps the most common advice out there for day traders and long-term investors alike. It’s extraordinarily important to be able to make informed, rational, and strategic trading decisions without allowing for any sort of mood, or even personality trait, to get in the way.

And this all-important skill can absolutely be learned in poker. Successful poker players learn very quickly to keep emotion out of the game. Even when they’re interacting with other players (and sometimes playing some mind games), the best stay purely analytical with regard to the cards and the chips.

Once again, poker and trading should not be equated. Poker is a game in which chance plays a significant role, and is not a reasonable means of investing for the future. But it is still similar to trading in a number of ways, and accordingly, it has a lot to teach traders looking to improve.

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