Stock Market as a game of Poker?

[DesertCat]

[ QUOTE ]

Ummm.... a 300% return (1500 BB) at 1.5BB/Hr would be 1000hrs/month?

5K -> 1mil+ in under 4 months? and 1Bil in 9 ?

Lets be realistic [img]/images/graemlins/wink.gif[/img]

[/ QUOTE ]

Whoops. I meant 30% a month, obviously. One problem with the returns on a Poker bankroll, vs. a stock market portfolio, is that poker returns don't compound very well.

As you grow your bankroll, it can't earn more unless you move up in limits and still win. And if your win rate declines at higher limits, like it should, your ROB (return on bankroll, [img]/images/graemlins/grin.gif[/img]) declines as well.

Finally you reach your best level, i.e. where you can't find higher games you can beat for a higher hourly gain. At that point clearly you need to take all of your excess bankroll and find good side investments for it.

[Sniper]

Right the market has the advantage of compounding which is huge over time, and exactly why you want to start investing as soon as you can even with small amounts.

However, since you brought it up, I would be interesting in your thoughts on reasonable ROI in poker.

Lets assume as in your example that someone used 500BB as the move up limits point. If you started with 5K playing 5/10, what would that player be looking at at the end of a year worth of play? (feel free to use whatever reasonable assumptions on monthly table hours and win rate you think appropriate) Is it reasonable to think that player could attain 55K by yearend, a 1000% ROI?

What about year 2 starting out playing 50/100 ?

My feeling is that poker returns become more linear, while the market returns become logarithmic over time.

[DWarrior]

I was just reading the article in the newest 2+2 issue about this, it's titled something like "what poker players can learn from blackjack players", and in there, the formula he gives for having a bankroll that will grow most optimally is EV/SD, I think, but he does say that there is a 50% risk of ruin in that.

I think that Poker is a hybrid between investing in securities and work, because my primary concern isn't ROI, but rather $/hr (or BB/hr, whatever floats your boat).

In investing, I don't see much point in trying to compute your hourly rate every step of the way, but you can look back after several years and see if the time spent was worthwhile. It seems like investing is converting money into more money.

Similarly, when you're going to your job, it's a bit silly to look at your savings account as your "bankroll" and consider your wage as ROI. You're really converting time into money. However, I suspect after several years, you can look at the growth of your savings account and see if taking up another endeavor would have yielded better profits.

I see poker as being somewhere in between, where you're converting both time and money into money. Who do you think does better, a person with $10 bankroll winning $20 in a freeroll after 3 hours of work (200% ROI), or a person with a $1000 bankroll winning $20 in ring games after an hour of work (2% ROI)?

Also, you won't always make higher returns with more money you have, it's just that there is no difference between $100,000 and $500,000 is the US markets today. If you made 20% returns consistently on $100,000 doesnt' mean you'd make the same 20% returns on $50 billion, it's just that the amount of money for the diminishing returns to kick in are so high that most regular people never experience it, as most investors don't control enough funds to move markets.

[Sniper]

[ QUOTE ]
the formula he gives for having a bankroll that will grow most optimally is EV/SD

[/ QUOTE ]

EV/SD (Expected Value/Standard Deviation, for those who didn't read the article) can be used to evaluate many financial decisions. In fact volatility is a key factor in the options pricing model. However, this conversation hadn't yet reached the point of discusing drawdowns. etc.

The basic assumption, by Desetcat in his post, was a average-good (maybe a 2+2er that actually learned something from the 2+2 books) that could achieve 1.5BB/Hr to start.

[ QUOTE ]
I think that Poker is a hybrid between investing in securities and work, because my primary concern isn't ROI, but rather $/hr (or BB/hr, whatever floats your boat).


[/ QUOTE ]

$/Hr is a ROI calculation... Dollars Earned per Hour invested.

[ QUOTE ]
Who do you think does better, a person with $10 bankroll winning $20 in a freeroll after 3 hours of work (200% ROI), or a person with a $1000 bankroll winning $20 in ring games after an hour of work (2% ROI)?


[/ QUOTE ]

From a bankroll perspective, the first is better, if each can consistantly achieve the same ROI (bankroll)over the long term, increasing the limits played according to the same parameters... in other words, if you could triple your bankroll every 3 hours you would very rapidly surpass a player earning 2% every hour, even if the 2nd had a $990 head start. In fact in only 15 hours, the 1st person would have a bankroll almost twice the size of the 2nd. [img]/images/graemlins/wink.gif[/img]

[ QUOTE ]
it's just that the amount of money for the diminishing returns to kick in are so high that most regular people never experience it

[/ QUOTE ]

Part of the reasoning in my earlier post is suggesting that diminishing returns hit MUCH faster in poker than they do in investing/trading.

[Dan Mezick]

Making a trade is just like finding a "good spot" to make a play in poker.

You look for most of the properties you want to see in the scenario before the trade. Usually, you want at least a 1:3 risk to reward ratio minimum. Learning to judge which spots have the ratio you want is part science and part art form.

There are usually many other properties that have to be there (in the situation) to form the complete setup.

No matter what, you must cut losers, ride winners, keep bets small and manage risk. Just like poker, you can do this and still lose (slower) if you have a method with no quantifyable edge.

"If you don't know what your edge is, you don't have one." - Jack Schwager

[70challenger]

I play a virtual stock market game from a on line gaming site .....it's played with real money. In the first month of trading I invested 280.00 and the portfolio went up to 4200.00 My problem is that I never know when to get out. Today it's sitting back at 2100.00.

I've been told that when you see it climbing...and this would perhaps pertain to any kind of stock you buy....let it rise to it's peak level....then when you see it drop down 10% sell out as this MAY be a correction in the stock itself. If I had followed this rule of thumb, I would have been able to buy back in with MANY more shares than I originally bought. Making my portfolio worth many times more.

In any case this game pays dividends on one of four virtual companies (randomly selected) each week ....they actually announce the dividend company and give you a chance to invest in it before dividends are paid out....not too much of a gamble there.

But yes ...I would agree...it's like a very long poker game with HIGH STAKES! And just like poker, timing is everything.
Know when to get out.

[DWarrior]

FYI, when the dividends are announced, I believe the stock actually gets corrected (I think it's corrected automatically, not by the market), so if a company paid, say, 5% in dividend, the stock drops by 5%, so you really don't gain anything by buying it based on the dividend payout.

[RedManPlus]

[ QUOTE ]

If $1,000 is a lot of money to you, I think you should focus on poker for now. There is no way to earn as high a return on a small investment (less than $100k) in the stock market, than a skilled poker player can using it as a bankroll.

[/ QUOTE ]

I've made about 200,000 trades last 10 years...
And DesertCat is right...
You need at least $50,000 to $100,000 to start playing this game.

On the other hand...
imo, stock market and poker are NOT similar...
Successful market players are hedgers and gringers...
Arbitrageurs not gamblers.

On the other hand...
** Running a business ** in the harsh, unforgiving business world...
Is very comparable to the strategic analysis of NL poker.

rm+

[img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img] [img]/images/graemlins/cool.gif[/img]

[70challenger]

FYI....the stock usually climbs when a dividend is announced in this particular GAME. If you already had shares in this stock before the announcement....well....you'll do well. Buy low sell high. Unless you've been playing ...you would have no idea as it really doesn't work like the real stock market. And there's a lot more to it than I care to get into. So far it's been alright....for me anyway.

I'll be using the 10% rule to sell at the right time...this time around. (I missed the boat last time)

Just my two cents worth.

[solucky]

I invest since 20 years on the stockmarkets and i start with 250$ !!!!!!!! Dont invest with "playmoney", you dont make the same decisions with a virtuell depot. You should see it as learning-money. And dont look for $$ look to %%%, the best way is to make a excel-sheet with a benchmark. At sample i can invest 4K / year and expect 12% anual and than look where you are with 45 -50