Trading and psychology

Daily Result £50.85

Back to winning ways. Just. But winning ways none the less. I traded two events today. Lost around £150 on the Baghdatis v Nadal tennis semi final from Wimbledon and won around £200 on the Lancashire v Yorkshire Twenty20 cricket clash.

Just seem to be going through the doldrums at the moment when it comes to trading. By that I mean the first three trades I placed on the tennis I had to close out for a loss. And then once the cricket went in running it was the same with the first two. Couple that with the amount of times I've had to close out for losses over the last few days compared to usual and it could be said I'm going through a bit of a bad patch.

As it is once I was around £150 red the pair in the tennis I simply left the match. By then it I couldn't even green up on Nadal even if I dumped my trading balance on him and figured my time would be better spent trying to make money on the Twenty20 cricket, which was about to start, rather than trying to reduce my tennis red. Basically there was more potential - and this kind of decision is something I discussed recently on the post about my biggest tennis loss to date. So maybe I did learn something from that loss!

Anyway, I switched at the end of the first set and got on with the cricket. Enjoyable game despite the poor trading start and although Yorkshire walked it in the end it was close for a long time and I kept my green pretty even throughout.

The experience of the last few days - with the market frequently moving against me as soon as I enter it - reminds me of when I used to play poker more seriously. I used to play a lot of short handed no-limit holdem cash games and even managed to win some pretty substantial tournaments both on and offline.

I had the full set up and used poker tracker to monitor results, target players, pick games and decide where to sit on games I entered etc. And also used GT+ for real time stats overlays when I was playing. Ultimately I reduced my playing hours as, for the stakes I was willing to play at, trading on Betfair provided a better hourly return - and, of course, the returns were more consistent. Afterall, it doesn't matter how good a poker player you are you are going to suffer bad runs where you seem to constantly lose to bad beats. Over time luck will even out. But that doesn't mean you won't get your fair share of poor luck.

Anyway, in conjunction with using all the software I read *a lot* about poker. And in amongst all the books on strategy, tells and statistics etc was a gem called Zen and the Art of Poker.

Now the book didn't really say anything I didn't already know. And, in fact, had some pretty poor strategy advice in I thought. But what it did have, all in one place, was thoughts on how to deal with losses, poor runs, bad beats and all things shit that poker throws at every player at some point.

And this is the real point about this poker anecdote. Ironically, although it has absolutely nothing to do with trading, for a long time I've considered the book one of the best you will ever find on the pyschology of trading. Amazingly enough, when I just went to Amazon to provide a link for the book, I found a user review which concurs precisely with what I'm trying to say. Infact, the guy sums it up better than I can when he says:

"Poker and trading are strikingly similar disciplines. They are both one man endeavors; they are both zero sum games played for financial gain at the expense of opponents; they are both oriented towards luck in the short run but skill in the long run; they both require proficiency in the realm of probability and statistics; they both require a taste for risk and an aversion to risk in equal amounts; they both require an ability to read the emotions of others while controlling the emotions within yourself; and they both see profits consistently flow from the losing many to the winning few over time. Because of these similarities, the skill sets of the poker player and the trader are in many ways interchangeable."

What a fantastic summary. I'm sure many of you traders out there who also play poker must be nodding your heads in agreement.

Anyway, of course, what it all boils down to is the fact that in the last couple of days I've dug out my copy of Zen and the Art of Poker and had a flick through. Just to remind myself to stay calm, not chase and ride out the rough patch. Stick to the basics that I know work and wait for the poor run to pass.

And you know what. It's worked! I'm calm about the rough patch, focussed on what to do and not to do next, and looking forward to what I hope will be a return to form over the next few weeks. A highly recommended read.

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