Online Trading & Poker

November 29, 2008 by Nick Wealthall

It’s 4 o’clock in the afternoon. My coffee is half drunk and long since cold. I’m leaning forward in my chair only a few inches from my computer screen. Impervious to how bad this is for both my eyes and lumbar regions I probably wouldn’t notice if a small hand grenade went off in the kitchen (actually it looks as if it did but that’s just a hastily made lunch). I’m engrossed in the movement of a few tiny pixels on the screen pleading with them to move my way.

This isn’t a completely new state for me. I play online poker… a lot. It would be classed as a problem if I didn’t make money from it on a regular basis. This, however, is a new addiction a new habit. I’m online trading for the first time; I’m hooked and sadly where as at the virtual poker table I’m a maestro here I’m a newbie flapping about like a moron and losing money very quickly as a result.

There’s a big cross over between poker and trading. It attracts people with a similar mindset and those that are successful share similar traits. I’ve always thought if I got bored of poker I could retrain myself and trade for a living – hey anything to make money at home in my big chair in my pants.

I wouldn’t be the first big poker names have bridged the two worlds. 8 time WSOP bracelet winner Erik Seidel moved from wall street when he lost his job in a recession to take on poker at the highest level. Years later online superstar Cliff Josephy (known as ‘Johnny Bax’ online) let a broking career to take up poker. Kirsty Gazes has made the move in the opposite direction, giving up playing cards regularly to concentrate on options trading. So what are attractions of trading online and why is there such a big cross over from one to the other and what do poker and trading share in common?

There was only one way to find out I need to try my hand at some online trading. After all thousands of hours of virtual poker must have prepared me for something in life?! I’d almost certainly be a natural; all I had to do was show up and the money would roll in right?

I’d be spending 5 days playing…sorry trading… on a website called BetsForTraders.com

. The site lets you bet on the movement of stocks, stock indexes and currencies. One of the problems with starting trading is that it can be very complex however bets for traders gets round all this by enabling you to bet directly on the real time prices and indices. So you don’t need any technical knowledge to jump right in…which was good because I had none.

Starting trading was similar to the first time I played poker. No idea what was going on but enough fragments of knowledge and a big enough ego to think I was going to win. Let me put it this way when you find yourself saying to your computer … ‘come onnnn beginners luck!!’ … it isn’t a good sign. I was going to play with a £500 pound bank roll. Immediately my years of experience playing cash games kicked in and I broke it down in to 10 fifty pound trades. I decided not to over think things and made my first trade. I bet that in 30 minutes the dollar will get weaker and be above 2.067 to the pound – its current price.

With 8 minutes to go it’s at 2.066 and I’m shouting at the screen. When playing poker I shout at the other players. Actually I quietly swear at them and it’s a good release. Here I’ve no idea what I’m shouting at; the traders in New York? The computer programme? Actual paper dollars?
It starts falling… really quite quickly.
With 2 minutes to go it’s nowhere near the level I need and my £50 bet can now be sold back for £2.57; that’s really not a good sign. Moments later I’m put out of my misery and £50 in the hole… and I’m hooked.

Perhaps the most obvious thing in common between poker players and traders is their attitude to risk. Before you all agree I don’t mean their ability to take risks I mean their understanding of it. A lot of the public view betting thousands on the turn of a digital card or on the tenth of a cent fluctuations in the price of a dollar as ‘too risky’. This is to mis-understand what traders and poker players are doing. All they’re doing is looking for profitable situations and investing in them; situations which have an expected up side.

This leads on to something else which really separates both groups from the general public; an ability to accept losses. Every good trader or poker player knows that not all of their bets will be successful however they know that if they keep making good decisions where the balance of probabilities is in their favour they’ll make money in the long run. The only way this becomes ‘risky’ in the conventional understanding of things is if they put themselves in a position to go broke because of the volatility involved in what they do. For a poker player this is playing at too high a stakes for his bankroll; for a trader this is risking too much on one trade or being too exposed on one position.

Knowledge is everything in both worlds. The more clearly you can identify a positive expectation situation the more often you’ll end up ahead. In both worlds despite the outside world lauding the glamorous flash exponents of the trading or poker playing arts it is the geek that’s king. Knowledge is everything and I have absolutely none. Using guess, hunches and trends I have managed to on 6 of my first 7 trades. Half my initial bankroll is gone in two days. You could use me to make huge money; just wait til I predict which way an index is going to move and put your house on the opposite!

It’s sick I mean most of these are almost fifty fifty shots!! I have to win some don’t I? Where’s this beginners luck I hear tell of, plenty of people have it when they take up poker against me. Clearly the markets are rigged against me – all those smug traders with their detached mansions in Hertfordshire and beautiful wives they never see because they’re too busy making the dollar go down when I’ve bet it’ll go up.

‘Don’t get emotional about stock’ Hollywood’s favourite trader Gordon Gecko once advised and I have. Every poker player knows what it’s like to go on tilt and have your ability to make logical decisions clouded by anger and frustration it’s the same for a trader. Chase your losses in either pursuit and what should have been a small loss can turn into a disaster. Trading; like poker, demands discipline and clear thinking at all times.
It’s amazing how often emotion can enter into decision making. When playing poker online I’ve trained myself to make as clear a decision I can based on my equity in any given hand. While trading I don’t have the knowledge I need to do that and I’m reduced to gut feelings and hunches – suddenly I’m a gambler… it feels dangerous, wrong… and far too much fun!

It’s my last day trading in this mini challenge and I’ve bumped along for a couple of days after my initial disasters. I need to break a cardinal rule and do something drastic.
I cling to one tiny bit of knowledge like a man whose just found out the odds of making a flush if you flop two of your suit. Apparently some U.S. economic data about their GDP or some such has come out today and it’s stronger than expected. My pygmy sized trading brain tells me the dollar must go up today. That’s it – lump on – I’m all in. I bet the dollar will be up against the pound at the end of trading in New York.

I’ve got three hours to sweat through and things start badly. It inches down a little after I make my trade. Come on Americans can’t you get anything right? Is your currency so rubbish it can’t even move up an eensy teeny bit?? Suddenly I realise I’ve been a fool, this same bet let me down yesterday and now I’m chasing my losses. As my self hate begins to grow slowly and the time ticks away …miraculously the dollar begins to rise. With twenty minutes to go it’s above the threshold and it doesn’t go back – I’m resisting the temptation to sing ‘I’m a Yankie Doodle Dandy’.

Somehow I’ve got myself out of a whole and I’m in a small profit for my trading. Now my ego starts to tell me I’m god of trading, I sit down push buttons and money flows to me, I’m like the anti-Nick Leeson.
When I calm down I know it would need a lot more work, knowledge and talent to show a profit from the market in a long run despite my exciting introduction. There is no doubting the similarities with poker in terms of the skills you need to succeed and the buzz you can get from backing your judgment and being right.

Now if you’ll excuse me the foreign exchanges are still open and my unfailing traders instinct tells me the Yen is in for a beating.

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