Many famous names like David Einhorn, Steve Schonfeld, Steve Cohen and Carl Ichan are among the plethora of top investors who also happen to be the card sharks. Many think that poker is a game of luck and the dealer plays the biggest role in determining a player’s fate. But, the evidence points are opposite.
At World Series of Poker, Steven Levitt of Freakonimics with Thomas J. Miles performed a study between a player’s level of skill and his ROI. They found out that high skilled players averaged a 30 percent return and others averaged a 15 percent loss. It suggests that poker is not a game of luck, but a test of skill. We have compiled a list of poker truths that’s useful for investors as well. If you are not sure whether poker is a good career option in India read our article and follow Poker Indian Group to get all online poker news updates.
Good poker players usually fold a lot of hands. Yes, it may seem a bit boring. But it’s also a great lesson for investors to learn to be successful. In poker, success is about building a strong bankroll and not winning hands as most of them are losing hands. It takes a lot of patience and discipline to protect your bankroll while waiting for a playable hand.
In investing, success is about the gradual accumulation of wealth over long periods of time and not the aimless pursuit of short time gains. Like poker, it also takes a lot of patience and discipline to stick with the strategy when you had engaged in risky transactions to get immediate results.
Poker players need to make betting decisions based on incomplete information. They have to decide whether to bet, raise, call or fold without knowing their opponents’ hands or community cards. Just the same way, investing also requires decision-making in the face of incomplete information.
The future direction of interest rates, stock prices and other factors that affect investment returns. All these can be analyzed but at the end. However, given the incomplete information, the key to success in poker and investing is to assess what is likely to happen and make decisions on the probable outcome.
Daniel Negreanu, one of the world’s best poker players said that having emotional control and stability is key to both poker and investing. Often players who have bad luck end up going on tilt, play aggressive and it costs them dearly.
Just the same way, eliminating emotional investing is a great way to ensure that you are maximizing your returns and avoid loses.
Human behavior is an important part of the poker game. you need to constantly determine what’s in your opponents’ hands based on how they act on the table. If a player leans back in his chair or reaches for his chips immediately after looking at his hole cards it determines that you have a good hand.
But what some poker players or investors often ignore is their own behavior. Remember, it is the human nature to buy when the market is up and feel good and also gets frightened and sell it when things are bad. Understanding human behavior also means understanding your own behavior as well as others.