The Happy Loser: In Poker and In Trading, a Big Loss Can Be a Big Win
(This article first appeared at CNBC.com)
I have played one million hands of live poker, most of them during my 17 years as a full-time grinder. The strategic and metaphorical commonalities between poker and trading are many, and have been written about before. Today I want to propose a question, one that I think professionals in both arenas should ask themselves.
Many times I have come home triumphant after a poker session, even though I played bad. My discipline was leaky, my focus was patchy, and I had a gnawing itch to gamble. But the cards were kind, and I made money, even though I had played my B-game.
And I’ve had many sessions when I playing great the whole way − I was alert, and patient, and I waited to get my money in good, time and again − but I lost the key pots, and I came home a loser. Because that’s just how it runs sometimes.
That was my life, for 17 years. Fluctuation, variance, running good, running bad, winning, losing, trying to play well, and analyzing myself to death. Sound familiar?
Somewhere along the way, the navel gazing revealed that my answer to this question had changed:
Would I rather play great and lose or play bad and win?
My wife likes to tell the story about the time I came home after a long night of poker and said, “I just had one of the best sessions of my entire life.”
“Awesome,” she said. “How much did we win?”
“We lost $1,300,” I replied.
Now, I’m not saying I’d prefer to lose. Of course I want to win, and winning always feels good to some extent, no matter how I get there. And losing always feels at least a little bit crappy, even when it’s a session to be proud of.
But what I really like is when everything breaks the wrong way, and I keep my cool and play rock steady to the last hand anyway. The steadiness itself counts as a victory.
When that happens, it’s not just that I played well, it’s that I played well while running bad. I didn’t tilt. And for me − someone who has been battling tilt for decades − this is the ultimate mental-game achievement.
The math looks like this:
A = Amount of pride and happiness over playing great for hours while losing: A lot.
B = Amount of angst over losing: Less than that.
A B > 0
So my answer to the question is that I would rather play good and lose than play bad and win.
Here’s the best thing about all this. When I changed my answer to the question, I made more money, by playing my A-game more often. Here’s an example:
OLD ME: The game is scheduled to stop in one hour and I’m stuck three buy-ins. To get even, I need to lower my starting-hand requirements. In other words, I need to put more money in action, and hope I get lucky.
The Old Me didn’t actually analyze like that before gambling it up at the end of a session. I just did it, mindlessly.
NEW ME: The game is scheduled to stop in one hour and I’m stuck $1,000. My expected hourly earn rate in this game is $100 per hour. So at this point, if I play my usual awesome A-game right up to the closing bell, I’m not desperately trying to book a win for the day. I’m just doing my job for an hour. No need to panic. Me and my bankroll will be back tomorrow, fresh and stable.
As for you, why do you trade? Are you playing for thrills? Or paying the bills?
For me, with poker, it’s always a combo. I live for the thrills. And there’s always the bills. The thing is, the roller coaster ride is inherent, to both of our games. We don’t need to seek thrills. They will come to us, even when we play tight.
So the next time you’re stuck and steaming in mid-session, ask yourself what you are trying to accomplish. Are you trying to play great? Or are you hoping to get lucky?