Have you ever heard about poker? Are you invested in any type of trade? If your answer is no, then don’t worry. Today we are going to share something very amazing with you. How many times have you heard people say “Trading and Poker are just like gambling”?
Trading on financial markets and playing poker are two sides of the same coin. But it is always a matter of debate as to which one is better to make money, in terms of safety. Before discussing the similarities and differences between the two, let’s throw some light on what exactly poker and trading are.
What is Poker?
Poker is a gambling game that is played with a deck of 52 cards. This game is nothing more than making bets against each other. The bets are made with the help of chips or actual money. A chip is a small disc made up of plastic or ceramic. Players make bets based on the value of their poker hands.
When the game is over, the chips are swapped for money between the players. Sometimes the chips are counted to decide the winner or winners of the game. The game totally depends on your luck. But with time a poker player experiences new things which help him to acquire various skills. These skills with good luck enhance the probability of winning.
What is Trading?
The activity of buying and selling financial instruments is known as trading. A financial instrument is an asset that can be bought or sold with some monetary value in a financial market like stock indices, currency pairs, company’s stock, commodities. Trading aims to outperform buy-and-hold investments.
Whether a market is falling or rising, it does not affect a trader very much. Usually, it profits the trader as the trader need not necessarily own the asset to sell it. They just speculate on the price movement and if they are correct with that, they make money.
Trading vs. Poker
Trading on financial markets and playing poker seem very similar due to a number of reasons. The very first is that both involve financial risk. In both the fields, the center of attraction for people is common and that is ‘the thrill of risk-taking‘. If you start counting the number of traders who are not involved in the poker game you surely will remain at zero. The second reason is that both offer similar challenges – betting and assessing the odds of winning. The third one is that both need to understand the opponents’ psychology.
If you look deeply into the matter, you will be surprised. Besides having all these similarities, the two differ widely on various factors. Let’s discuss them in detail.
A trader works with an inductive mindset whereas a poker player uses a deductive mindset which will be formed with experience. For example, in poker people usually are less patient. As a result, they bet and risk their chips even if they are not in blind positions with forced antes.
On the contrary, in trading traders do not invest blindly. They wait for the Margin of Safety i.e. when in the market the margin of error associated with forecasts will be minimum. Therefore, the probability of succeeding is more in trading than in poker.
In poker, a player can’t always play too safe, so he will have to wait for premium hands. If one does so then he may lose a lot of money. The reason is that when you have a good hand then others will not call your big bets.
In the case of trading on financial markets, you do not lose much if you lose. The reason is it’s better to buy a wonderful asset at a fair price than a fair asset at a wonderful price. Meaning is that you will get profit forever by spending a little more money only once. But you will lose forever by saving a little more money only once.
We very well know that both the game and trading involve a high risk of money. But making money by means of poker is more risky than trading. Because it’s almost impossible to find and put yourself in the most advantageous position. For example, suppose you are among the top ten players of poker in the world. Then also if you are playing with the remaining top nine players there is a high probability of losing a bet. A portion of your wins always depends on your luck.
On the other hand, a trader can first investigate the market he is going to enter. It helps him to know whether there exists a bigger trader than him or not. Trading as per your own position in the market will increase your profit or prevent loss.
Poker players sit at a table and wait for their turn to play. Those sitting in earlier positions have to play earlier and those in later positions will play later. Most of the time, the earlier players are on the verge of loss. It happens as the later players take advantage of seeing others’ actions and understanding their strategy.
In stark contrast, trading never forces you to act before or after someone. You are your own boss. Anytime you feel that you have to wait until more information then you are free to do so. For example, if a large company has already taken a position in the market then you can wait until you receive a good signal to trade for the same.
Conclusion
Humans want to earn large amounts of money in a short time. It is the desire which traps him in the web of trading or poker. Once your interest has developed in any one of the two, you will unconsciously be caught up by the other. That’s why it’s hard to find traders who are not poker aficionados.
But after comparing the two from each angle, one can say that trading is on the upper hand to make money. By money-making, we mean earning money for the long term in a safe way.
