MAKING BETS
There are a lot of comparisons of trading and poker. Working with probabilities, managing bankroll, being aggressive when you have the upper hand and the reality that even a good play can lose. While there are MANY great things to take from poker into trading, I believe the foundation of the game is a bit different. Once we understand those differences, we can talk about the similarity.
What’s different:
In poker, you all play the same game. it is equally difficult for each player and they compete linearly against one another. There are hands that are good, hands that are bad, pot size, Bankroll size, You know the rules and you have the same rules. You simply work to leverage luck and skill together to make the game work in your favor. We can assume, even with luck at play, you must be in the top ten percent to win over time. In trading, much of this is the same. HOWEVER – a very big difference is, trading is not poker. It is a deck of cards.
Trading is not poker. It is simply a deck of cards.
You are given the market. The market is a deck of cards in which many are playing a game. You however, can determine what game you will play, how complex it will be AND what the odds of winning are.
YOU MAKE THE RULES
This is the most important concept I have seen since starting to trade.
YOU DECIDE HOW HARD A GAME YOU WANT TO PLAY. PERIOD.
You can play a game with spreads where, you have fixed risk and fixed reward. It’s up to you to build a game that results in positive EV.
You can play a game with futures where a small risk is taken and a target is not defined. You then have the opportunity to play for bigger winners but must accept BE trades often.
You can play a game where you enter long at the sweep of a low.
You can play a game where, every day you enter at market at the open with a 1 pt TP.
You can play a game where you enter at wild times when other people do weird things.
You can play a game where you act in each moment like a fighter pilot playing back and forth in the flow of orders.
You get the point. Where profitability begins is at the moment you play a game, any game, in such a way that you win more of bigger than you lose. That’s all.
Why is this important
This is critical because, we often enter the market thinking we need to play the game the market plays. We need to figure out the best way to trade and then trade up to the top 10% skill level.
This is NOT TRUE
Here is an example. We can play a range game. Let’s say there is a range in price. When we get the to the edge of that range, you enter long with a 3 pts stop. For this to work, you need a range that is bigger than 5 pts. So, you take every range edge with a single entry and exit of -3 or + 5.
You have a game
This game is simple. What if you now want to play this game with a higher win rate? You take only the first and second touches of the range. Then, you also take stop runs and re-entries into the range.
This is a game you can play. What if you like this game but you also see that a lot of ranges break down. and give greater R. Maybe, you add to your game the idea that on a break down, you either flip OR add. What pattern do you need to see to take this action?
Finally, can you sit and only play this game?
This is the hardest part of trading. You have a deck of cards. At any time, you can be tempted to start playing a different game. One that looks sexier, seems to be happening today or, just seems fun right now.
STOP
This is how you lose the game of trading. To win at trading, you can play a super simple game, but you must stick to that game and that game only.
ONCE YOU HAVE A GAME
First, you need to come up with a simple game you can play. It doesn’t need to be the best game. Simply a game that is profitable and can be played easily every day. Now, you look to play that game on bigger and smaller timeframes. The more you can play, the more you can make. This is why a simple easy game is better than a hard one. Play your range game on the 5 min, 15 min and 30 min charts. Then, play it on the 60 min. Find out what you need to bet in order to make those TF’s work and play!
Once you have a game that you can win 60% of the time OR have greater than 1:1 bets (ideally both) you will want to play your market game all the time. Trading will begin to take care of itself.
This is how you make trading a coin flip and not a complex, winner take all poker game where you typically lose your ass.
It is in this way, I believe trading to be a much easier game to play and win over time than poker.