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The Psychology of Poker: Lessons to Learn From Trading

The Psychology of Poker: Lessons to Learn From Trading

The have a whole lot of articles about Poker Strategy. In this Series we want to take a step back and look at the psychology of the human mind and see what we can learn from that. 

When thinking about ways to improve in Poker, players usually come back to their strategy. Is it good enough? What do I need to change? How does it change depending on who I’m facing? Why isn’t this working? What is the right move when I have xyz?  

The truth is, strategy is a very important element of your game, but it’s not everything. Often players don’t understand where they go wrong if their strategy isn’t working out the way they want it to and they keep coming back to try and fix things that potentially aren’t even broken. 

To get a better understanding of essential elements that are outside of the realm of strategy, we need to take a step back and inspect the human mind in different situations. This may shed some light on certain correlations and ultimately improve your gameplay.

Why Trading? 

There is a big argument to be made that trading does share a lot of commonalities with Poker. There is a reason why professional Stock Traders are encouraged to play Poker in their free time. Most of the things mentioned in this article are written with Online Poker in mind, though the same concepts do apply to live Poker as well. 

Please note that we are NOT encouraging you to start trading stocks or crypto, but rather want to give you some insight about lessons the author has learned from trading stocks and the conclusions that can be drawn, regarding the human mind. Please see this as an opportunity to learn from other’s mistakes, as we will draw the parallels to Poker and how you can benefit from this knowledge. 

Another thing to mention is that we are referring to trading, not investing. The difference is generally the timespan. If you decide to buy Bitcoin every month and hope to see a profit some day when it goes to the moon, that is not trading, that is investing. Trading refers to taking a position in the market (any market, be it Crypto, Stocks or Forex), either Long or Short (essentially buying or selling, by borrowing said commodity from your broker, selling it, and buying it back later, hopefully at a discount) and having a target and a stoploss placed at which point you exit the position. Depending on your strategy, this will be done in less than a few days, sometimes just minutes or seconds. The importance here is the stoploss: You need to exit bad trades, otherwise you may just blow your account very quickly. 

A Rough Start 

A lot of traders have a similar first experience when they start trading: They get somewhat familiar with how things work, try a demo program for a few days, think they get the hang of it, switch to the real thing and blow their accounts. Often multiple ones.

The big takeaway here is quite simple: 

The pressure of handling real money poker is a lot different than using demos or fake money or chips with essentially no value. In the Psychology of Poker Series, you may often hear us talking down on playing for no stakes at all, and there is a reason for it. In a situation where you are already 5€ deep into a pot, it may be hard to let that go. Let’s say you are holding Aces and the board clearly shows a flush with 4 cards of the same suit, while you are not holding one of them... but you are holding Aces, the best hand in Texas Hold’em. The right call is to fold. But you are 20 Big Blinds deep already. You have invested half of your budget into that pot. Can you see how folding the hand becomes harder? 

It’s important to keep in mind, that there is a time and place, where playing for virtually nothing is an important step to understanding the game as you start out on your journey. Beginner traders hate losing trades, because they did everything perfectly to their strategy and it still didn’t work out. It’s unfair. So, they move their stoploss and somewhat hope for their trade to turn around and go their way. You need to understand that learning to your strategy and sticking to it is an important lesson and if that is going to cause you an issue, it’s better to experience that with no stakes. 

Find Your Market and Adapt 

When I started my trading journey, I started out with NASDAQ futures. I liked the way the big moves felt and figured big moves meant more money. But the big and violent moves often hit my stoploss. After doing some research, I switched to the S&P500 Futures. The moves were smaller but a little more reliable. I obviously had to rethink my strategy, but after a while, I found that this market suited my style of trading better. 

So, what do you prefer? Cash Games? The thrill of winning 10€ in a single hand and just being able to call it a good day? But what does your bottom line say? Are you consistent with that? Or is your bottom line red because you lose 2€ per hand for 7 hands in a row before you can bring home the bacon? Consider switching it up. Maybe you need to be able to consistently make money in tournaments before going back to cash games. Maybe you need to change the people you are playing with. Consider switching your Online Poker Site and play against some weaker players. 

It’s important to find your style and the “market” that suits you. Consistency is key here. Your bottom line needs to be green, otherwise you are just bleeding money. 

Consistency Is Key 

By know you can probably see how all these things are tied together. If one of these factors is not on point, your whole system will suffer.  

We have touched on this subject many times already, but this is a very important point that cannot be stressed enough. You need to be consistent with your gameplay and your balance.  

Don’t Lose It All on a Bad Day

As mentioned before, I have blown more than one account. It’s nice to make 1k in a day and just kick back and relax the rest of the day. But then you come back the next day and you lose 600€ within the first hour. Do you keep going? Of course, you do, you still have time, and you need to make the money back that you lost. Right? Well, an hour later you are down 1.2k. Do you keep going? What about being down 2k? 3k? 

What if your Budget for Cash Games is 20€ per day? Do you keep going after being down 5€? Do you keep going? And at 10€? 15€? If you go bust, do you just throw in another 20€ and start again? 

It’s important to understand: You are NOT gambling! Poker (or trading for that matter) is not a slot machine where you throw in money until you win. Bad days will happen. Let them happen. Once Tilt sets in, your chances to recover decrease drastically. Always live to play another day. 

Manage Your Available Budget 

Managing your budget in trading is a lot harder than in Poker. You really need to have a good understanding on how much you need to risk and when to call it a day. 

In Poker you have a great option: Poker tournaments.  

Let’s say your budget is 10€ per day. You can enter two tournaments at 5€ each. If you win money on the first one, no need to risk the other 5. The second one is basically just a second chance. This is honestly the best possibility I can think of to test your skills and see how far your skills have progressed. If you can win enough prize money on a consistent basis to keep playing tournaments with your winnings, that’s when you know that your skills are good enough to possibly throw some cash games into the mix.  

As an additional bonus, A lot of Poker Sites offer Freerolls, which are once again a great way to potentially boost your bankroll with no risk involved.  

Always limit your budget. You do not want to gamble. Never chase a loss. 

Review Your Decisions 

Now, your target has been hit or you are calling it a day for better or for worse and you still have some energy left. Of course, it’s always good to learn more about strategies and moves, but the most important thing to do is to review your games. 

In trading, it’s very hard to look back and realize that you did not really follow your strategy at one point or another. You may have made a rash decision, were taken in by FOMO or maybe you were just bored and decided to take a gamble. It is important to see those things and recognize what happened, analyze how you felt and remember what was going through your head at the time, to avoid making those same mistakes in the future. 

The same goes for Poker. 

A lot of Online Poker Sites will give you the option to replay the hands you played and see what you and your opponents did at certain stages of the hands and the game.  

Taking a step back and reviewing your plays from a rational perspective is vital to improving. Why did you shove at that point? What were the signals? Did you read them correctly? Did you follow your strategy properly? Was that poker bluff you made on the turn a strategic one or did you maybe just have a feeling? Were the odds in your favor?  

It’s important to review your bad plays as well as your good plays. Even if a play worked out, that doesn’t necessarily mean it was a good play. You might just have been lucky. In return, not every loss was a bad play. Again, you might have just been unlucky.  

Remembering what was going through your head while making these plays is essential for improving. Looking back and thinking “Yeah, he had just drawn his third King on the River, he got lucky with a 1% chance, so the next hand I was just mad, thinking he can’t be this lucky twice in a row.” is a very good realization. Yes, it may have been a bad play, but reviewing it and remembering that feeling and maybe recognizing that feeling after the third, fourth, fifth or even 20th time is still an improvement. Eventually you will catch yourself during a hand, thinking “What the hell am I doing? I do this every time! Stop! Breathe! What are the actual odds here?” These are lessons that no amount of studying strategy can teach you. And this is the skill that separates a decent Poker Player from a great one. 

Experience VS. Studying 

The last important thing that a lot of Poker players don’t understand is the value of experience and how it relates to the information studied. 

This is a lot more obvious in traders. A lot of traders start out just trying out things and looking for strategies and clues on their own. Once they hit a wall or blow their accounts, they start researching – excessively. They read a million books, watch every video on the topic out there and maybe even do some course. But when they come back, they seem to be doing worse than before. So, they try every single thing that was mentioned in those books and videos, probably blowing another account or two, before going back to studying how to play poker.  

This tends to be less common in Poker players, nevertheless, it is still very often the case. At some point, almost every player will neglect one or the other. 

The right ratio here is about 50% as a beginner, maybe slightly more focused on studying. Studying includes everything from doing research to reviewing your games, working on your mentality and portioning your budget. Once you progress and can generally make a stable profit, the focus shifts to playing at about 80%. This does mean, that you still need to keep yourself updated about strategies and news and review your games on a regular basis, although with the basics clear, at this point it’s mainly about reviewing your bad plays and judging whether it was bad luck or a flaw you need to work on. 

Considering the common knowledge that theory is when you know how something should work and nothing happens, while practice is when something happens and no one knows why, please make sure to understand what is happening and why it is. Create a good combination of Games and Studies, to understand things in theory and be able to use this information in practice. 

The Big Takeaway

Our mind doesn’t just switch to Poker Mode once we just down at the table. You can learn and realize a lot about yourself and others from all areas of your life and your whole personality sits down at the table with you.  

You are still that same person, table or no table – and so is your opponent, no matter how calculating and cold they may seem. 

Understand what is going on in your mind and how you tend to think, only then can you truly evaluate what you are doing. 

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