Monday, January 18, 2010

Trading and poker

Some time back Bloomberg ran an article inelegantly titled “Harvard Poker Pro Says Texas Hold ‘Em Can Teach Traders to Fold.” The article quotes Aaron Brown, author of The Poker Face of Wall Street and risk manager at AQR Capital Management. Brown suggests that professional poker players would most likely be better than average traders. “They know to push when they have an edge and they know how not to bust, and that’s a tough combination to find.”

What other qualities do successful professional poker players share with successful traders? According to financial recruiters, a “rational approach toward risk, speedy decision-making under pressure, discipline and a well-trained memory.” Brandon Adams, who teaches behavioral finance at Harvard, stresses the intelligence, self-control, and confidence of successful card players. Moreover, he continues, “in poker, people are used to not sitting back and waiting for the fat pitch. They’re used to skirting the edge of ruin and they learn the tools of how to do that.”

Whether playing poker hones the kinds of skills necessary for trading success or whether successful poker players and successful traders are simply cut from the same psychological cloth I don’t know. But Susquehanna International Group obviously thinks that poker is a good training tool. They have been using poker to teach their new traders for over twenty years.

I suppose this is the appropriate place to call attention to Larry W. Phillips’ book The Tao of Poker: 285 Rules to Transform Your Game and Your Life (Adams Media, 2003) available as a bargain book on Amazon for $3.98. I came across this book by chance a year or two ago when I was looking for something else and consider it a serendipitous find.

1 comment:

  1. Great post Brenda,

    I have developed the Texas Holdem Investing concept of investor education based around this specific idea.

    Texas Holdem Investing uses poker as a medium and tool for teaching the key elements of successful investing - developing a plan, patience, risk control, and emotional management.

    I would be interested in your feedback on the free online book about Texas Holdem Investing at the site, and also the various blog posts on the subject (including posts on Susquehanna and David Einhorn).

    Keep up the good work,

    John (aka The Masked Financier)