I got introduced to poker in 2020 and have taken to this game. You can read the rules of the game here. The rules are quite simple. The richness comes from the lack of perfect information
As the community cards open on the board, one bets not only on one’s own cards but also based on the strength of the opponent’s hand. As the opponent’s hand is hidden from us, we are forced to make probabilistic decisions
As the card are dealt, one makes these decisions based on betting and other actions (called as tells) of the opponent. The beauty of the game is that one can see the result of the decisions quite quickly – in a matter of 5-10 min as the hand is played out. This allows for rapid learning
As you play the game, the parallels with investing/trading become clear. Investing has far more variables and is not the same as poker. That said, both involve decision making under uncertainty
I wanted to share some learnings from the game, as related to investing
- Losing even when odds are in your favor: Decision making under uncertainty involves making probabilistic decision. Even when the odds are in your favor, the result can go against you. The probability of win could be 60% which is considered high in poker, yet 40% of the time the result will be against you (no surprise there). This happens often and inspite of all the rational thinking such events do upset me. Most other players in poker or investing are not even thinking of probabilities
The key is to focus on the process and not the outcome (easier said than done)
- Keeping losses low: Odds will often not be in your favor and you will be tempted to make a bet. At such times, folding your hand against all your instincts is the right decision. Making such decisions is never easy as one is losing money – by folding in poker or selling a position in the portfolio. However, such decisions are the key to doing well in the long run.
What ‘feels’ good in the short term is not good for long term results and vice versa. That’s why investing is simple but not easy
- Know yourself: Some players are aggressive risk taker. They will bluff often and make big bets when odds are slightly in their favor. Other players like me are more conservative. I am constantly calculating the odds and making bets accordingly. I am also focused on not going bust in a game (losing my entire stack). I invest in stocks in the same manner. The only difference in my poker game is that I will occasionally bet high when the odds are really good.
Successful players play to their natural bent of mind, but at the same time should try to do what is not comfortable for them. Combing the right amount of offense and defense is an art and a lifelong process in poker and investing
