“What makes a good trader?” Newcomers to the trading industry often ask that, and it is hard to give a definitive answer. Trading is as much about instinct and natural response as anything that can be taught.
Undoubtedly, a certain type of person makes a good trader; analytical and reactive are good attributes to have. That’s perhaps why those with a background in poker often find themselves becoming successful in the world of trading. Vanessa Selbst is a classic example of a professional poker player becoming a success on Wall Street. She gave up a lucrative poker career in 2017 to enter the trading world, and she’s proven to be very good at it indeed.
In her retirement post on social media, Selbst said she saw parallels between trading and poker: she claimed both consisted of “a bunch of nerdy kids collaborating to try to beat our opponents at a game”. Whilst that certainly strips back both industries to a base level, the core principle is right. For all its fluff and bluster, trading is simply a game, part chance, part skill. Poker is the same, which is perhaps why it is so easy to crossover.
What other elements of poker go into making a good trader? We’ve selected three skills required for both, which might help answer the question at the top of our piece, what makes a good trader.
Work With Uncertainty
Whilst poker is seen as a game of chance; players can weigh the competition in their favor. One method of doing this is calculating pot odds, working out whether your hand is better or worse by assembling information and filling in the blanks. You don’t only know the value of your hand, but you can see some cards in Texas Hold‘em, and you can work out the cards other players might be holding. That allows you to do the math, see how good your odds are for a particular hand, and adjust your strategy, despite the uncertainty and unknown variables. That is stock trading in a nutshell; it’s all about working with your information, filling in what you might know and making a decision despite not being entirely in the picture. Will de Lucy, managing director of trading educator Amplify Trading, sums it up better when he says, “you have to be someone who gets a thrill out of performing within uncertainty.”
There will always be losses in a game with uncertain elements and variables you cannot control. Poker players incur losses; even the strongest of hands can be beaten. Four kings would win 99.9% of poker hands, but what if your opponent has four aces and pips you on a 0.1% probability? You would lose from a position of almost certain victory. The same can happen in trading, and to be good in both fields, you have to be able to move on from those moments. De Lucy once again sums it up, asking if a trader or player can recover enough to be a success. “Can they take that loss, breathe, get over it, rethink, and not play their next hand with agitation, frustration, or anger because of what happened before?” he asks.
Selbst won a lot of dollars in her career, and she’s been back around the tables recently doing the same again. Sometimes, hundreds of thousands of dollars would be at stake, and even with the uncertainty, even being able to get over the losses, that causes huge stress. The same goes for trading; sometimes, those traders go rogue because they can’t deal with pressure or losses. Poker teaches you that you have to deal with situations; it’s your money and your future at stake. Can you make the right decisions, as Selbst did, despite knowing the wrong move could cost you? If you can, you are not only likely to be able to succeed in poker, but you might also have a future as a trader.