Recently I discovered Texas Hold’em Poker on Facebook. I never really enjoyed playing poker very much, but to my surprise it is pretty interesting. Why? Because the more I play poker the more I realize how it is like trading.
Image courtesy Joe King
As I play, I immediately relate many things I have read about trading to what is happening in the game. It seems that many the information in books about trading is totally applicable to poker.
After reading this article about a possible rocky future for the U.S. (and world) economy, I wondered how many people are prepared. What would you do if we had another depression? What would you do if we have hyperinflation and the dollar becomes worthless?
Are You Ready?
I have mentioned it many times before. Depressions tend to happen once every 80 years. How long has it been since the last one? 80 years. Thanks to crowd psychology, once everyone has pretty much completely forgotten about the last one, the next one can start. Good times come and good times go. Economics happens in cycles. Continue reading →
Trading and gambling have been metaphorically tied together forever.
Traders talk about making a bet. They say they hit the jackpot, or they left their money on the table.
Trading and gambling, after all, do share commonalities–risk, returns, a certain element of randomness, and position sizing–to name a few.
But the comparisons, or lessons, don’t stop there.
According to a new study from Cornell University, investors and traders can all learn from a slightly contrarian gambling strategy. The study makes the case that online poker players who win more hands, end up losing more money.
Some folks believe that artificial intelligence or advanced technology will never beat the market. After all, markets are composed of people and no one understands people better than, well, people.
So a machine would never be able to keep up with highly complex, emotionally-charged market. I think that machines might never master the market, but I believe that their performance would match human traders, or could serve as an excellent companion to human traders–for instance, you.
A recent experiment shows that machine intelligence is rapidly closing in on its human counterparts. An artificial-intelligence system beat a group of human competitors at poker. Most people, by the way, approach investing like it was a poker game.
Now a poker game doesn’t exactly mimic the complexities of the market, but the basics are certainly there: odds, rewards, risks, payoffs, patterns.