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POKER SHARK 2.0
Poker Players Have What it takes to be Great Investors
Submitted by Luckylizzy on Thu, 2010-01-14 13:19
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Turns out poker skills and those needed to be a good investor are one and the same. Last week Kiplinger’s came out with a very interesting special report which showed the connection between the two.
Author Bob Frick says that there are five common errors associated with both that a person needs to master in order to be highly successful. They are Greed, Overconfidence, Regret, Seeing Nonexistant Patterns and Holding on to losers.
Greed is probably the biggest one. It causes us to fixate on the winnings rather than on the game/investment itself. This can lead to some devastating results since it causes us to miss developments that could lead to us to losing the bet. Sometimes the best initial hands or ideas can prove to be useless once the game progresses. It’s important not to get emotionally attached, but rather try to focus on the actual risks involved with each step adjusting for every new piece of information.
Overconfidence can be just as dangerous as greed. Even the best players and investors sometimes get caught in this pitfall. The more a player gets lucky the more willing they are to take on bigger risks.
Studies have shown that often times, players actually lose the most money right when they get off of a winning streak. The key they say to combating overconfidence is to make a game plan and stick to it. It will be very tempting to see how far your luck will take you but you have to learn to control this urge if you ever want to make any long term profits.
Regret is a powerful emotion. Coming off a big loss, players tend to either overcompensate with big risks in an attempt to earn their money back or can become very cautious and conservative with their betting habits- both of which can lead to further losses so it’s important to focus on the long term and get your head back in the game as quickly as possible. Everyone makes mistakes. The important thing is that you learn from them. Do not let your emotions get in the way of hurting your bottom line.
Seeing Nonexistent Patterns is also a major issue. If someone has a run of luck they are more willing to bet that that luck will continue even though their chances never actually increase. Often times, cards may land in a way that appears to have some purpose, such as a consecutive grouping, but this does not mean that the next card to land will continue this pattern. In investing people may see a pattern of success or failure that doesn’t have relevancy in regards to where the market is headed. Having a combination of greed, overconfidence and hardwired instinctual behavior, avoiding nonexistent patterns can certainly be tricky. In order to kick the habit one has to learn to shut down the part of their mind that is responsible for this faulty logic and focus on the actual odds. Practice makes perfect so try and focus on this one every time you play the game.
And Finally,
Holding on to Bad Hands can certainly be one way to trip yourself up. Just because a hand looks good initially, doesn’t mean that as the game progresses it will continue to be. Don’t let your ego get in the way of your game. If a stock appears to fall dramatically or a hand turns out to be a losing one, cut your losses. Make it a game of awarding yourself for good decisions rather than good outcomes. You can’t control the luck of the draw but you can control your actions. The right decision may not always prove to bring about the result you’re looking for, but more times than not it will provide you with the best chance possible.
So in case you missed it, the main idea is basically this; the key to success at both investing and poker is to learn to control your emotions and not let yourself get sucked in to false logic. There isn’t some magical way to do this. While it may come naturally to some people, everyone has the potential to become successful at it if they are willing to put in enough time and energy.
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