There is a reason why many intelligent and academic people believe that poker is 100% luck. In fact many people who have played the game for a long time may also still be of that impression as well. I think that an underlying reason as to why this is has something to do with the short term variance being very severe. However lessons from financial day trading are pretty powerful here and once we go deeper into that subject then similarities with poker stand out. Many academics believe that the stock market is totally random (just like in poker).

However it is possible to make money in random markets and it has simply to do with staking levels, profit and loss levels and money management. If a stock is trading at $2.00 and you have good reason to believe that it will fluctuate by $0.50 and you would only be right 50% of the time then you could cut your losing trades and place a stop loss at $1.70 so that you only lost $0.30 per share. But you rode the entire profit and each winning trade saw you close the position at $2.50 if you bought the stock at $2.00.

This gives you a profit of $0.50 per share when it goes your way but you lose $0.30 per share when it doesn’t. If you bought 10,000 shares then you make $5000 when you win and lose $3000 if it goes bad. If you have a 50% strike rate of winning trades to losing trades then you will make $2000 on average for every two trades or $1000 per trade on average. But this still does not get around the fact that 50% of your trades will be losing trades. This situation is identical to poker, no matter what you do then you will experience horrible losing days and sessions. In fact most professionals only win a percentage of sessions that is close to 50%.

But their money management skills are very strong and so they make sure that their winning sessions amount to more than their losing sessions even though the number of winners to losers may be as low as 50-50. So it needs pointing out that a strong poker player often loses just as many pots as a losing poker player but the difference comes from the level of pots that they win and lose. Skilled poker play leads to bigger average winning pot sizes and lower losing pot sizes. This when compounded over any one week, month or year leads to profits.

Novice poker players or inexperienced poker players tend to assume that professional players make huge bluffs and reads more than what lesser players do but this simply isn’t the case at all. Poker should be treated as a business and this means minimising your losses the best that you can. To be able to do this means basically being at one with the game and feeling out what your opponents are doing not just in the game that you are in at the moment but at the level that you are playing at in general.