Trading and Poker: Short-Legged Pool Table

2:33 pm - July 26, 2010

So I had a decent poker score recently – a thousand dollars in a little over three hours.

It was my preferred game: $3-$5 blind No Limit Hold ‘Em. I sat down at the table a little after midnight (generally the best time to enter a game), and was pleasantly surprised to find two toasted frat boys on my right.

With every hand they were whooping it up: Teasing the cocktail waitresses… trying to buy every pot… playing “macho man” poker as seen on TV.

The frat boys’ chip stacks had grown tall and fat on a steady diet of suck-outs and bluffs. They took a sort of vicious glee in showing off with every pot they stole, clueless that this bad habit allowed experienced players (like yours truly) to read them like a book.

I smiled and waited.

About an hour after I arrived, Fortuna grew bored with her drunken boy toys and decided to abandon them.

With Fortuna’s departure, the steamroller bluffs suddenly stopped working; garbage hands that sucked out with two pair started running into bigger (and more legitimate) two pair; what had previously gone right now generally went wrong.

It was time to go to work.

Once the flow of luck changed – as it is wont to do at least once in a session – it was like a switch had been flipped, but these guys didn’t know it. They kept trying to bully and force their to way victory. But that which was once tissue paper had (surprise!) now become a brick wall.

For two hours straight, I played Muhammad Ali to their collective George Foreman. It was the classic “rope-a-dope” style known to every patient pro: Let the wild aggressor throw haymakers into the air until he gets tired. Then, via the judicious combination of skill and timing, pick your spots to hit back twice as hard.

As the session wound down between 3 and 4 a.m., those poor frat boys were in a punch-drunk daze. As evidenced by their confused muttering, they literally didn’t know what hit them. In the final tally, one of them had been double-felted (forced to dig into his pocket twice) and the other was whittled down to a microscopic nub.

The quiet, smiling local to their left had taken their chips. ALL their chips.

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When It All Goes Right

It’s one of the many similarities between trading and poker: When a session goes right, it’s a beautiful thing to behold.

When you’re running good, feeling strong, and maximizing your skills, there is a real sense of ease – no stress or strain to the play whatsoever. It’s like you don’t even have to try. Every situation speaks with perfect clarity; the positions and the cards play themselves. Every “next move” in a seamless chain of next moves comes as simply and cleanly as drinking a glass of water.

Of course, it takes a lot of legwork and preparation to attain such a zen-like state. Michael Jordan had the ability to float above the basketball court — or so it seemed to his opponents — but he only got it by working his ass off in practice. In a very real sense, the blissful ease of execution is a form of reward for the sweat and strain of preparation.

In a fruitful meeting of East meets West, the German philosopher Eugen Herrigel puts it well:

Far from wishing to waken the artist in the pupil prematurely, the [zen] teacher considers it his first task to make him a skilled artisan with sovereign control of his craft. The pupil follows out this intention with untiring industry. As though he had no higher aspirations he bows under his burden with a kind of obtuse devotion, only to discover in the course of years that forms which he perfectly masters no longer oppress but liberate.

He grows daily more capable of following any inspiration without technical effort, and also of letting inspiration come to him through meticulous observation. The hand that guides the brush has already caught and executed what floated before the mind at the same moment the mind began to form it, and in the end the pupil no longer knows which of the two — mind or hand — was responsible for the work.

— Eugen Herrigel, Zen In the Art of Archery

Once you know exactly what to do and why — a state achieved through long hours of practice and contemplation — you are no longer burdened with the mechanics of proper form. Instead, having internalized the proper forms, your intuitive artist now has free rein…

Short-Legged Pool Table

On further reflection, the sense of ease that accompanies skillful play often manifests itself as a cheerful ability to wait.

Small losses are of no real concern to the justifiably confident player, because he (or she) knows that modest setbacks are simply part of the natural ebb and flow of the game. Nor is there frustration or concern when Fortuna takes her sweet time in rounding out the probability distributions (as she always does in the end); experience teaches that the transition always comes.

In this I was reminded of an analogy applied to Stephen Schwarzman, one of the founders of the Blackstone Group.

It’s been said (in jealously admiring tones) that Schwarzman is like the favored corner of a short-legged pool table. No matter how things tend to “break,” the balls always roll toward Schwarzman’s pocket.

This is a good analogy, I think, for how poker and trading feels at the higher levels. When your skills and your diligence have reached a certain level, you too become like the short-legged pool table.

You can look around the poker room — or the marketplace as it were — in quietly smiling knowledge that, simply by dint of the natural order of things, the “breaks” will lean in your favor… and profits will flow into your pocket over time.

Not Forcing It

Actively cultivating this mindset can also serve as a buffer against the temptation to “force it.”

In trading, as in poker, a significant aspect of the skilled practitioner’s edge comes in minimizing risk and “going with the flow.” Thus, if you get in the habit of justifying unwarranted risk, or otherwise pressing where conditions are not right to press, your edge becomes forfeit.

Think, then, of the inspired stillness of the short-legged pool table. The table just “is”. The favored pocket does not have to struggle or strain to induce the balls to roll to it. In accordance with probability and the laws of physics, they just do.

And thus, if trading profits flow to your pocket as a function of proper positioning and the natural order of things, then what is the point of forcing it at all?

Again, when operating efficiently, you should not be sweating or straining. (There is a time and place for sweat and strain, but that is what practice sessions are for!)

You may be working hard in terms of diligence, sharpness, and keen-eyed observation, of course – but this should be an easy, flowing sort of work, in the same sense that a well-trained runner “works” as an inspired and finely tuned machine, smoothly gliding through the miles.

Then, too, there is a certain cool detachedness when the dollars finally come… a sense of “been there, done that” when you take down another big score. After all, why should you be surprised when the profits pile up? Were you not prepared for this? Were you not positioned for this?

And thus your habit of winning — of being a consistent winner, in trading, in poker, and in life — is simply a function of the natural order of things, the universe acting in accordance with its laws.

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