Thursday, October 14, 2004

Objectivity and The Fundamental Theorem of Poker

From David Sklansky's The Theory of Poker:

Every time you play a hand differently from the way you would have played it if you could see all your opponents' cards, you lose; and every time you play your hand the same way you would have played it if you could see their cards, they lose.
An analogy in trading can be made concerning objectivity while holding a position:
Every time you execute a trade that you would not have executed had you been flat, you lose; additionally, every time you refrain from executing a trade that you would have executed had you been flat, you lose.

As always there are exceptions; one may argue entries and exits are not entirely symmetrical. But generally, the goal in objectivity is to prevent your current position from interfering with future opportunities. Taken a step further, try to pay extra attention to scenarios that run counter to any inclinations you may have stemming from current holdings -- seek to minimize the time it takes to reverse your mindset from long to short and vice versa if circumstances require.

2 Comments:

Anonymous Anonymous said...

I would rephrase Slansky's theory as a trading analogy as follows:

Every time you enter or hold onto a trade that you would not have entered or held had you known the trade's odds, you lose; and every time you enter or hold onto a trade that you would have entered or held had you known the odds, you win.

TriPack

3:38 PM  
Blogger illiquid said...

That would be the most direct application of that theory, but I think it would be somewhat difficult to calculate the actual odds on the profitability of a trade -- hard enough calculating the % chance someone will check-raise you or is bluffing, as per Slansky.

5:20 PM  

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