Changing Styles...

[firewalker 10]

...

 

"When do you push aggressively? When do you fold? When do you stay flat?"

These are good questions...

 

I'm wondering how many traders change their approach after they had a number of profitable trades. Do they get overconfident and double up? Most will probably raise the stakes after a number of successive losses, in order to gain back what they've lost faster. I'm not sure if you should change your position size based on what happened before... is it really the best way to approach the market? I mean, the market has no history of whatever trades you took before that and whether they were profitable or not is irrelevant to the probabilities of the trade you just put on.

 

When playing poker, I think it's better and probably more efficient to raise the stakes when you have better hands and your opponent has less chips. During the course of a poker tournament, I've often seen people call with hands where they wouldn't have played with in the beginning because there were just too many people sitting around the table at that time. It seems logical, when there are 9 people around the table your pocket queens as a starting hand is pretty good, but when there are only 3 people left, you feel even stronger (especially before the flop).

 

Although there are similarities between poker and trading, I think this isn't one of them. Should you trade more aggressive because you just had a number of profitable trades? Yes, you should probably fold if you suddenly run into an abnormal string of losses with no apparent explanation. But in general, I think you should stick to the plan, and only adopt when the market circumstances require you to do so, not because of elements outside of the market. Just my 2c...

[brownsfan019 17]

Another great post FW.

 

I would agree 100%. In poker, you know how many you are up against and can play accordingly. In the markets, there's always an opponent out there ready to pounce on your mistakes. You are never 'short handed' when trading - it's always a full ring game.

 

(oh man, I am going to love these analogies).

 

And in poker you are able to zero in on a weak opponent(s); whereas you are not necessarily going up against a particular person in the markets. You never know who is on the other side of that trade you just took.

 

Great example FW of the differences in poker vs trading.