📈 THE TRADING MOTTO TO LIVE BY

📈 TRADER PSYCHOLOGY

📈 THE TRADING MOTTO TO LIVE BY

The best Sylvester Stallone movie that you’ve never seen is called “Shade.” 🎥 It's about cheating at poker. The tagline is, “When betting is your life, leave nothing to chance.”

It's a motto to live by when you are trading.

Although poker and trading are different, it is fascinating how the game informs trading. That’s because poker and markets are essentially about deception. 🤥

Think about it. If there was no deception in poker or the financial markets, the games would be mind-numbingly boring and easy to win, as it would all come down to numbers. Indeed, without deception, there would be no way for us to play the game at all, as machines would handily beat us every time.

A well-researched study showed that hedge fund managers who played poker performed better than those who didn’t. Their advantage wasn’t mathematical; it was psychological. They were able to “read the market” after years of “reading the table,” and that edge helped them outperform.

That’s why trading is such a fascinating game. Far from the common perception that it is all “hard numbers,” it’s actually much more about soft clues that provide the true edges. Being in sync with the market isn’t about understanding the data; it’s about understanding how the market will understand the data. 📊 That’s what Keynes—who was the greatest trader economist who ever lived—meant by the idea of a beauty pageant.

Once you realize that the market is constantly trying to trick you into the wrong move, the idea of honoring stops becomes much easier. You no longer view stops as a referendum on your character and intelligence; you take them for what they are—successful bluffs. After all, you don’t turn suicidal every time you get bluffed out at the poker table. ♠️ You generally shake your head and smile in admiration at the chutzpah of your opponent.

Once you consider stops in the same light, it becomes a lot less stressful to trade.

The key, of course, is to minimize being bluffed out of a trade. That is a skill that we all try to master, and it's a never-ending journey for all of us who trade. But the key—in both poker and the market—is to not fall for the bait. 🎣 📊💰.