While poker and stock day trading are entirely different activities, they share more similarities than one might expect. The popular card game represents a combination of strategy, skill, and luck. Interestingly, all three elements should also make the list of a component of day trading success. Both poker and stock day trading involve a form of betting as an essential part of the process, even if day traders wouldn’t use this term.
The skill and strategy are game-changing aspects that can decide the outcome in the player or trader’s favor. This is why successful poker players have, in theory, greater chances to become profitable in day trading. To support this argument, we’ll share a story below, but prior to that let’s check some similarities between the two.
For Meir Barak, founder of Tradenet.com – the largest day trading school in the world, day trading is an independent profession, the goal of which is to generate profits by buying stocks cheaply and sell them at a higher price. As Tradenet about what is day trading:
“Day trading is simple in concept but difficult to implement. It’s simple because the rules of technical analysis are easy to understand and it’s difficult because it requires us to overcome the psychological inhibitors of fear and greed.”
Thus, the emotional part is the first aspect that separates professionals from amateurs in both poker and day trading. In the context of the card game, we use the term “go on tilt” to explain the behavior of someone who loses his cool and plays irrationally. Similarly, day traders who cannot control their emotions wouldn’t be able to stick to their strategy and avoid bad decisions. Professional poker players have learned to extinguish their emotions and rely on their logic, which is why they would have higher chances to become profitable day traders.
Another important aspect is money management or bankroll management. In poker, a deep stack would allow the player to take more calculated risks and better manage his chips, which ultimately represent his funds. The deep stack is the equivalent of a funded account with a large deposit, which allows the trader to enter multiple positions with small amounts. On the other hand, the short stack in poker is similar to a small deposit in day trading. In such situations, each round of poker and each trade might turn the balance to zero.
A third factor that might decide the winner in poker and day trading is the implementation of a good strategy. In poker, amateur players play at least three out of five games, while professional ones can play only one, as they wait for the right card combinations to show up. In a similar fashion, good stock day traders would enter a position only when the proper setup shows up. Think about strong historical trading data mixed with favorable technical analysis signals.
Thus, if you consider yourself a successful poker player, you might have serious arguments to get involved with stock day trading. However, there is a lot to learn before making the first step. Day trading academies like Tradenet can help you understand both basic and complex rules of the stock markets.
Now let me share the story as pledged earlier. Last year, Vanessa Selbst, a three-time winner of the World Series of Poker, was hired by Bridgewater, one of the largest hedge funds in the world, with about $125 billion in assets under management. Selbst has won more than $11 million over 12 years by playing poker, which made her the most successful female in poker. Now she is trading for a top hedge fund. This story confirms once again that professional poker players might already have trading in the blood.