Picking good stocks is only step one to become a consistently profitable trader. And for most traders, exit technique is the hardest part. Many people say that to trade successfully you want to develop the right mind-set. Unfortunately, such winning mindset can only really be developed through experience. But there is a short cut to get through the learning curve without throwing thousands of greenbacks in the process. This short cut is playing POKER.
Yes you heard me right. Allegedly, playing poker has a lot of similarities with making an investment in stocks. Firstly, both cope with cash, doubts, and an eager judgment of potential risk and reward. In this post I will explain the likenesses and differences between stock trading and poker. But before moving on, make sure you know the rules of Texas Hold'em and smooth with the terminologies.
Think of stock picking as attempting to find good hands to play. In Texas Hold'em, you can glance at the 2 hole cards and choose whether you can play the hand or not. Likewise, you can investigate the stock before entering a position. Fortunately for you traders, nobody will raise pre-flop, so you just pay the commission. Do not forget to exit the position you must also pay the commission, which suggests that the cost of entering a position is two times the commission. Good poker players only play good hands, so you need to do comprehensive researches before entering a position. One great thing about trading is that you do not have to wait for good stocks like poker players wait for good hands, you will find good stocks on stock picking sites or using screeners to find them yourself.
Once you call the blinds in poker, you see the flops and two more cards. Think about these cards as the performance of your stock after you enter the position. In poker, the flop can make an excellent hand, a medium hand, or an awful hand (by helping your opponents). In trading, you can observe the possibilities of the stock also , and you need to objectively judge the disadvantage and upside potential of the stock. In poker, there are times that you have got a good hand, and your competitor have a better hand, and you know that you are beat. These are the times where your mindset matters the most. A professional poker player will fold his hand without regard for the quantity of money he has put into the pot. As a trader, on occasions that you believe the upside potential fails to effectuate, you should sell the stock with no regard for how much you have lost. From a different perspective, when a good poker player knows he has got the winning hand, regardless of the possibility of losing at the brook, he would bet aggressively, without fearing the small losing possibility. In trading, this interprets to if the stock goes up and manifests higher upside potential, you shouldn't fear that you're going to lose your current prize. Thus the winning mind-set is to ride when the stock is going up, and sell when the stock is losing its heat. This discipline is easily claimed than done. So frequently I've heard people lost all their money because they cling on to losing positions (due to wish) and sell winning positions too early (due to fear).
By playing poker, you would get the chance to take charge of your emotions, learning not to wish when you're beat, and not to be afraid of when you're expedient to win. You want to lose small and win massive, not the opposite.
Now go practice. This mentality only develops with experience.
Yes you heard me right. Allegedly, playing poker has a lot of similarities with making an investment in stocks. Firstly, both cope with cash, doubts, and an eager judgment of potential risk and reward. In this post I will explain the likenesses and differences between stock trading and poker. But before moving on, make sure you know the rules of Texas Hold'em and smooth with the terminologies.
Think of stock picking as attempting to find good hands to play. In Texas Hold'em, you can glance at the 2 hole cards and choose whether you can play the hand or not. Likewise, you can investigate the stock before entering a position. Fortunately for you traders, nobody will raise pre-flop, so you just pay the commission. Do not forget to exit the position you must also pay the commission, which suggests that the cost of entering a position is two times the commission. Good poker players only play good hands, so you need to do comprehensive researches before entering a position. One great thing about trading is that you do not have to wait for good stocks like poker players wait for good hands, you will find good stocks on stock picking sites or using screeners to find them yourself.
Once you call the blinds in poker, you see the flops and two more cards. Think about these cards as the performance of your stock after you enter the position. In poker, the flop can make an excellent hand, a medium hand, or an awful hand (by helping your opponents). In trading, you can observe the possibilities of the stock also , and you need to objectively judge the disadvantage and upside potential of the stock. In poker, there are times that you have got a good hand, and your competitor have a better hand, and you know that you are beat. These are the times where your mindset matters the most. A professional poker player will fold his hand without regard for the quantity of money he has put into the pot. As a trader, on occasions that you believe the upside potential fails to effectuate, you should sell the stock with no regard for how much you have lost. From a different perspective, when a good poker player knows he has got the winning hand, regardless of the possibility of losing at the brook, he would bet aggressively, without fearing the small losing possibility. In trading, this interprets to if the stock goes up and manifests higher upside potential, you shouldn't fear that you're going to lose your current prize. Thus the winning mind-set is to ride when the stock is going up, and sell when the stock is losing its heat. This discipline is easily claimed than done. So frequently I've heard people lost all their money because they cling on to losing positions (due to wish) and sell winning positions too early (due to fear).
By playing poker, you would get the chance to take charge of your emotions, learning not to wish when you're beat, and not to be afraid of when you're expedient to win. You want to lose small and win massive, not the opposite.
Now go practice. This mentality only develops with experience.
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