Article on the 2+2 magazine about transitioning from poker to trading

http://www.twoplustwo.com/magazine/i...rom-online.php

Making this transition is tough but it is rewarding. In trading you can make almost unlimited amounts, in poker it seems that every year you have to play more just to keep the same income

Most of the article sounds like fluff.

Though I agree with the he said about probabilities and Black Swan events being a key difference between poker and trading, and can hurt if you're too big and on the wrong side. In trading, if a position is goes very against you, there is no guarantee "it will come back". You can gauge probabilities from looking options, but those are all based on assumed price distribution (e.g. log normal). But in poker, probabilities are very well defined, and win rates can be bootstrapped if sample sizes are large enough. if you're a winning player, you just have to grind through temporary breakeven/down swings. There are no Black Swans in poker, each session is the same (assuming good tilt management).

My observations:
Markets have vast more liquidity and are here to stay, whereas there is more systematic risk in poker. Games can easily dry up, as we've seen in the past decade.

Trading is extremely capital intensive, poker is more skill intensive. In order to move up in trading, you just throw more money into your account and gradually increase size, but in poker you necessarily need skill to move up and then build a sample size to prove your edge.

This might vary, but profits are more consistent in trading.

There is also another aspect. Trading income is not marginalized like gambling. If you try to open a bank account and say you will deposit $100K from gamling sources, most banks will tell you to walk. But if the source are capital gains that is a much acceptable form of income. Similar problems can help when you try to rent, apply for credit etc

say your self employed
its the truth

a good friend of mine, Ivy league educated trader, spent 10 years trading, doing very well. Went from happy good guy, to an angry guy. He quit, and is now a 2/5 poker pro at Foxwoods and is very happy he left trading.........

Well obviously he is an outlier because full time live pokers is miserable

Oh.... he is still a very miserable person, but says he's happier being miserable in the casino than as a trader.... lol

and on the top of that, earning less ? your friend is lol

Trading can be frustrating but busting out of big tournaments ITM or having to grind 6+ tables just drains the soul. I will take markets any day

I'm surprised there isnt more discussion of this since 2p2 is mostly pro poker players trying to transition into something else. But it seems anytime someone brings it up they get flamed "lol noob, gl trading against big banks" etc.

The thing about trading is that it has an enormously steep learning curve. This coupled with the fact that there are practically infinite ways to approach it just muddies the waters. My approach may not work for you and your approach may not work for me. Traders don't have to worry about trading against big banks as the biggest opponent is themselves.

It just takes a lot of time to figure out what trading approach best suits your personality and strengths and then master that approach which takes a tremendous amount of study and practical experience. Most just don't have the patience or discipline or faith and end up taking unadvised shortcuts which will sink you every time.

Doesn't make sense why he quit if he was successful. He went from making potential "unlimited" income to ~$25/hr? Also, I don't see how playing poker and trading are mutually exclusive. If he trades a little higher timeframe, he can do both.

Anyone who says that has never traded in their life, or done so unprofitably.

i agree. the fact that a low stakes tourney grinder like Clayton can make it as a trader is pretty inspiring. theres a bunch of poker players at his firm too. i dont think he even spent much time training (maybe 6 months or something?).. and it's not like these guys have a background in high level math/physics..

yeah i find the nature of this discussion on 2p2 puzzling. i mean if we eliminate nvg tards then the assumption should be that you are talking to a large audience of people that have a proven track record of bankroll management, understanding where their actual edge is, and have the skills and work ethic to create those edges

it seems like success in poker and trading have a lot in common yet when speaking to a poker audience the assumption is they have zero skills in those areas

obviously theres variance in both poker and trading but what kind of returns can different types of traders get?

i always see discussions point out obvious things like BRM, learning curve, types of trading, etc but i rarely see someone mention what the actual opportunities are

what kind of edge on the market or roi can a trader expect? (ev adjusted)

-with 1,3,5 years experience
-with talent levels a, b, or c
-in types of trading a, b, or c

seems like nobody even attempts to answer any of these things. maybe the only people responding know just enough to point out hazards

Problem is, is that there are no easy answers and just too many variables. Day Trader or swing trader or longer term? Fundamental or technical? Stocks or bonds or options or commodities? Risk tolerance? Capital available?

If someone is truly interested in becoming a trader they should do some study to figure out what types of things they want to trade and in what timeframes they want to trade them. They need to spend a lot of time on trading simulators learning the mechanics as well as the pitfalls that await them. All of this takes a great deal of time and effort. There is a lot of trial and error involved in finding what works to your own personality and strengths. Trading psychology is also very important. Looking at a static chart after the fact is one thing but clicking the mouse when the chart is ticking live at the right edge is a whole different world.

I mean there's no clear cut answer to these questions. Trading / investing is essentially infinitely scaleable for an individual investor, and options can provide tremendous leverage. As an example, look at the chart of VA before it got acquired. Now imagine how much money you would have made if you'd put your entire bankroll into call options.

It really depends on how good your research is, how much risk you are willing to take, etc. As a practical matter, there are a few people on this forum who did 100%+ last year. Even if you can average 20% a year, you will be worth a f*ckload of money in 20 years. I don't think that's particularly difficult for an individual investor if you are willing to devote a lot of time to it.

Basically, at the end of the day poker is reduced to an hourly rate, and your hourly rate almost certainly isn't as good as you think it is. On a risk adjusted basis, poker isn't worth it IMO unless you're a real superstar. Trading / investing is a way better deal.

Very intriguing. Based on above posts, it sounds like transitioning into trading is the no-brainer choice for pretty much any poker player who was successful and able to amass a significant bankroll to work with. In the past, I was always discouraged from looking too far into it because of the "no money in trading" posts I've seen around this forum.

I've done a ton of reading on trading forums. Its funny because they repeatedly talk about all of the pitfalls of trading and why so many people fail, and 95% of the pitfalls are things most full time online poker players would have no trouble with. bankroll management, tilt control, chasing losses, taking too many trades (aka playing 80 vpip), etc

http://www.trade2win.com/boards/firs...o-i-start.html

Pretty good posts as an intro for those interested.

Cool, thanks!

One thing I've wondered about that is not discussed in the link in OP: is the profitability of trading highly dependent on general market conditions? For instance, I know there is currently a lot of discussion out there about how the markets will suffer over the next several years. Is a profitable trader sure to be negatively affected by these broader market downturns, or is there (more or less) an equal amount of opportunity to profit in any conditions ? I assume the latter, as there will always be individual stocks that far outperform or underperform the broader market.

Also, how does the prevalence of high-frequency trading and the automation of trading systems affect profitability for traders? Is it in any way similar to the impact of bots in poker (net negative; inevitably leading to reduced EV for everyone except the bots), or will there continue to be significant edges in trading for the foreseeable future?

Sorry if these questions are excessively naive/noobish.

this post is exactly what my entire post was referring to in pointing out the problem with these discussions and the direction they take

someone could ask me about how much you can make playing poker. i can answer that in 2 ways. the first one requires barely any knowledge and just points out hazards and why its a difficult question. the second can add value

-there are many types of poker. online, live, holdem games, stud games, omaha, cash games, tournaments, stakes, etc. on top of that theres variance. on top of that theres BRM. theres talent and work ethic. on top of that theres variance, game conditions etc etc.

- there are many forms of poker. theres many variables, you understand that. what i do know is the edge online no limit holdem ring game players have from micro stakes to mid stakes. i cant speak intelligently about live poker or hu. these are the ranges....

i do believe is there are people that trade and they have an idea of their edge. they have an idea of what type of edge others in their field have. they understand that variance is a part of it. they probably have enough info to provide an opinion on earning potential.

as someone who doesnt know much about trading i could have provided the same answer you did. it doesnt really offer any insight, especially to a poker audience

i hope you get my point. im just trying to steer this conversation in a productive direction. im hoping you have some info or knowledge. the entire point of my original post was to stop the tail-chasing responses. im not saying your answer was wrong and im not looking to just argue either. im hoping conversations like these actually go somewhere
yeah i agree that poker seems to be a waste of time at a certain point. no idea how to gauge that because getting info on realistic returns seems to be a ghost. as poker players we should all understand theres a lot of factors involved but that at the end of the day you can still educate someone asking questions about earning potential instead of just pointing out why its not an exact science

i think poker players are mostly wasting their time with the game vs trading in a financial sense(obviously a massive generalization) because of the reasons you pointed out. its hard to determine where that point is though. even from just a pure and simple pov that game conditions and market conditions will continue and we are thinking purely about money. even at a 20% return in the markets over 15 years, a poker player making 150k a year playing online and having 400k in the bank is getting financially slaughtered by sticking with poker. its not that simple but certainly something to think about

Well, I know my edge and I know what my edge was throughout the years with various approaches. But I don't really know anyone elses. Poker just isn't remotely as complex when it comes to approach and options of approach. I am a momentum player meaning I buy and sell breakouts and try to ride markets when they are trending. I also trade commodities and my approach isn't nearly as effective for equities. And I tend to stick with the more volatile commodities because they fit my approach. When I made markets in options on the exchange floor my approach and edge were different. When I scalped spreads my approach and edge were different. When I arbitraged similar markets against each other my approach and edge were different.

It all comes down to trading instrument, time frame, approach, risk tolerance and capital available and the differences can be infinite. I'm sorry you don't like the answer but it is what the answer is. Trading is a uniquely personal journey and something you yourself need to figure out.

If you have ever read about the Turtles, Richard Dennis' (very successful commodity trader) trading experiment where they hired a bunch of guys to trade for them (the Turtles). They gave them all the same rules and trading parameters. Some were wildly successful and some total busts yet all were given the same rules and approach. Why? Each person will put their own personal twist on anything and everything and is why it is impossible to answer your questions.

what answer?

you have an answer or 3 and have chosen not to give one

yeah i enjoyed the turtle trader book and it gave a report on the traders returns. it also showed that the effectiveness of their methods have deteriorated over time

Realistic returns are 20-100+% a year. Except you could do considerably better. Or considerably worse. Hope that helps.

Sorry, but if you want something like this for trading, I just don't know how you'd do that.