People often look down on poker as a mere game of chance where players are at the mercy of the dealer. But poker is so much more than that, and is similar to life itself. You cannot control the hand you are dealt, but skill, confidence, and the ability to lie your teeth off can help you get farther than you think.
Poker is a game of skill and not chance. It's worth taking a look at how poker can improve your ability to win at the stock market. Because just as poker can teach us about life, it can also teach us the skills needed and the ways of thinking which can help us invest wisely.
Here are several simple tips that can help both on the poker table and on the stock market.
1. Stay calm
Everyone knows that poker players need to keep their faces calm and expressionless. The slightest snort, a bobbing Adam's apple, or the raise of an eyebrow can be the sign that a player is bluffing or has a terrific hand.
Stock market investors do not need to read those little gestures. But they do need to stay passive and keep away from emotional investing. Bad investors rush to buy or sell based on some piece of news without sitting down and intellectually assessing how the markets will be truly affected. Stay calm, never panic, and stick to a plan.
2. Stick to a plan or style of investing
Not all good poker players are the same. Some rely more on math and can calculate in their heads what their relative chances of victory are. Some are better at reading their opponents. As Pokerology observes, there are four rough archetypes of poker players, and each one should stick to a particular style.
But what matters is that good players know what their strengths and weaknesses are, and they stick to a playing style which maximizes their strengths and minimizes their weaknesses. Stock investors should do the same thing. Warren Buffet has a different investing style and different goals compared to an ordinary stock investor. But if that ordinary investor can find his own style and not drift away from said style, it will make sure his investments become more consistent.
3. Know when to fold 'em
If you've ever played poker, you have probably had a moment where you got dealt a great hand, arrogantly kept to that hand and kept raising, and then got beat by someone who had an even better hand. I know that has happened to me.
What was my mistake? I was arrogant. I refused to consider that my great hand could be beaten, and was too proud to fold. You can see this mistake being made in many a casino room you'll stumble into. So I ended up losing a lot more than if I had actually analyzed my opponents and realized that I could be in trouble.
This sort of behavior happens in the stock market all the time. Arrogant investors after a period of success become convinced that they cannot fail, or that the stock they invested in cannot fail. So they stick with a stock even when it begins to slide, all the way until it hits bottom.
David Apostolico wrote in Poker Strategies for a Winning Hand in Business how there are poker players and businessmen who are more obsessed with power and "winning" than they are about making money, and wise individuals should just flatter them while taking everything they own. A good investor should be able to know when it is time to let go of a stock, no matter how appealing it may seem.
4. You're not No. 1 -- and that's fine
Apostolico's above remarks are important for another reason. In poker and investing, you can work, learn, and read as much and as hard as you can. But the reality is that no matter how hard you try, you will almost certainly not be the next Warren Buffet or Daniel Negreanu.
And that is perfectly fine. You don't have to be. People commit mistakes all the time in both fields, and lose huge amounts of money in the process. But what matters is how we can learn from those mistakes and use them to do a better job.
Do not be too proud to ask for help. Do not value "winning" and being number one above everything else. Understand what you can and cannot do. Do the best you can in investing, and even when you fail, keep your chin up. Another, better opportunity will come along.
All of those tips are how you get better at anything, whether it is poker, investing, or anything else. You don't have to be number one to be successful, and playing in the stock market should be about making money above all else.