Spend enough time observing the stock market and you’ll find far more parallels to poker playing than it seems. Both require managing your risk, controlling your emotions, and making potentially very expensive decisions based on incomplete information. And the parallels run even deeper than these broad generalities. In fact, you can take many of the most well-known trading maxims (pieces of wisdom) and apply them directly to your poker playing to improve your bottom line. Here are three of my favorites.
Buy Low, Sell High
By far the most famous maxim in investing is buy low, sell high. You want to buy assets when they’re undervalued and sell them when they’re overvalued. In poker, the principle is the same, but applied to decisions instead of stocks.
Think of bluffs, value bets, and hero calls as three of your favorite stocks at the poker table. When you’re fresh, clearheaded, and thinking well (generally in the early to middle part of your session) that’s when you want to “buy” these stocks most aggressively. You can go for thin value in a spot that most players would miss. You can catch someone bluffing without any emotionality driving your decision. You can fire the triple-barrel bluff in a spot that’s sort of close based on your read.
But when you’re tilted, tired, or stuck, that’s the time to “sell” on anything outside your most reliable plays. When you’re on the backend of a losing session and feel the frustration mounting, that’s when making borderline plays is akin to buying at the worst possible price.
Exactly like in the market, the path to profitability at the poker table is recognizing when a specific play has greater upside than risk. And when your decision is being made through the lens of tilt or frustration, that’s usually not where you’ll find your biggest edge.
Be Fearful When Others Are Greedy, Greedy When Others Are Fearful
Warren Buffett’s famous line about market psychology applies perfectly to table dynamics.
Generally speaking, when everyone at the table is playing loose and aggressive, there’s a lot of value to be had in going the opposite way.
Take Pot Limit Omaha, for example. When No Limit Hold’em players enter the game, they usually play far too many hands, chase too many weak draws, and call far too light. The pros in these games understand the importance of good preflop hand selection and drawing to the nuts. They know that if they simply stay patient and play their A-game, the “market” will reward them.
Conversely, inexperienced short stack players who dabble in the hyperturbo SNG format rarely understand just how aggressive they have to be to give themselves a chance. In these games, the pros play “greedily” and attack in all the spots the recreational players fear putting their chips in.
These are the ways professionals counter-trade the population using Buffett’s famous maxim. They assess what the crowd is doing or feeling and head the opposite way.
The Market Can Remain Irrational Longer Than You Can Remain Solvent
This is one of the most important quotes in trading, and it applies to poker variance more than almost anything else.
Just like you might be right about a company’s fundamentals and still get smoked buying its stock at the wrong time, you can play well at the poker table, perfectly even, and still lose. And not just for a little while either, but for much longer than seems possible.
During a nasty downswing, the cards don’t care that you’re playing well. Or that you’re “due.” Just because you’ve been running below expectation for three months doesn’t mean you won’t run even worse for three more. Or six.
The “market,” aka variance, can stay irrational far longer than most players recognize, and if you don’t prepare well it may last longer than your bankroll can stay solvent. This means that your job as a trader of poker chips isn’t just to play well, but to manage your risk in a way that will allow you to survive periods of irrationality.
So, build a larger bankroll than you think you need, make your shot-taking calculated and disciplined, and resist the urge to flick in a crying call just because “he can’t possibly have it again.” When you live in an irrational world and play an often irrational game, the truth is that yes, yes he can.
