A Poker Game I Will Never Forget
How playing poker for the first time reinforced in me the importance of probability and risk management.
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2-years ago I got an invite to play poker with a few old colleagues from work.
The problem was, I hadn’t played poker since I was 12-13 years old.
I had no idea how to play poker.
I also don’t want to look like a fool, and be the first to leave the table.
What kind of trader doesn’t know how to handle risk and probability?
And I think I’m pretty decent at trading, so I said to myself, why not?
What I lack in poker knowledge, I will make up with my experience managing risk with a probabilistic approach.
It’s all about probabilities, EV and risk management, at the end of the day, I thought.
To enter the game, I had to add to the pool prize €100.
And if I was going to throw away €100, I needed to have confidence that I could at least survive the game, and not embarrass myself.
The first thing I did was obvious, I needed a system.
The thing is, I only had a few days to develop it.
I downloaded a guide from the internet, with all the possible hands, and I noted down their probability.
Yes, I knew I was going to look like an idiot going into a poker game with a paper on my hand, but I play to win.
I also wanted to know if I could play reasonably well, before accepting the match.
So I decided to pass a challenge first.
I had to play online against bots, on the hardest possible mode, and if I won, I’d go.
I opened this website to play poker against bots, chose the hardest possible difficulty, and began playing.
It took me around 3h-4h, if memory doesn’t fail me, but I did beat them all.
Sure, it’s only bots, but remember, I didn’t know anything about poker by this time.
I even needed an instructions manual to play the game.
After that, I sent a message in whatsapp to the group, and agreed to the match.
Friday arrives and I go down to the office to have the match.
People are still working by the time I arrive, I have a chat with a few friends, and after a while, we all go to the table and start playing.
We were 6 players.
Only I didn’t play that game on a regular basis.
I sit down, naively confident because of my trading background, and start playing my system.
I don’t bet on hands I have nothing, bluffing isn’t my game tonight.
I developed this tier system for risk management.
I bet 5% of capital on the worst hands, and I scaled to a maximum of 20% on the high tier hands.
The game starts, and I get a few decent hands, a few pairs, three of a kind, and I began betting.
The thing is, as the game evolved, people started catching up to me.
They knew I was only playing great hands.
Pretty obvious, a noob can be read quite well.
But as the night progressed, my stack of chips was piling on, and I was already seeing the finish line, and the possibility of walking out of there with the entire pool of cash.
A few of the players had already refilled new positions, by paying another €100 and entering the game again.
I was one of the few that had the original stack, and I had double what I had initially staked.
I was in a pretty comfortable position.
I was there for 6 hours straight that night.
It was getting really late already, and I was exhausted.
Nonetheless, I ain’t one to give up.
If one plays a game long enough, low probability events tend to eventually happen.
So… I get a full house.
I knew this was really big.
I still remember trying not to smile, and consciously forcing myself to keep my “poker face”.
As I began betting, the others bet with me.
As I increase my stake, they got scared because they knew I was only playing great hands.
One of the guys, was always bluffing.
He had already refilled his stake 3 times by that time.
He was drinking all game, and I knew I could take him at that point.
So I start to increase my stakes.
And he follows.
My maximum allowed position per great hand was 20% of total capital.
So that even if I lost on a highly unlikely hand, I can still keep playing.
He keeps increasing his stake, and I mine.
By the end, I was all in and so was he.
I was sure I was going to bring that cash home, I had a full house!
Everybody is looking at the game, you could almost hear a pin drop.
I show my hand first, pretty confident that I am going to take him.
As he shows his, I get completely stunned…
He also had a full house, with 1 card higher than mine.
I am baffled.
I get this immediate feeling of frustration.
Seems that I am back to the early trading days, when I was betting too big on trades, and blowing up my portfolios.
It was not about the money, it’s only €100, but it was about that feeling when you can almost can grab the reward, that win, and it’s taken from you.
And by something so unlikely.
I remember that day so vividly.
Why?
It reinforced me the idea of how important risk management is, regardless of the perceived likelihood of a win.
Yes , had I won, I’d be here telling you a great story about how I beat experienced poker players, never had played before.
But I got a more important lesson from that experience.
Had I followed my rules, bet according to my plan, that night would have been much different.
Always manage your risk, it doesn’t matter how unlikely it is for you to lose.
Survival is the name of the game, and the slow turtle eventual wins the race.
Wish you all a great day 😊
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Great post!
BTW, talking about poker, read the latest book from Nate Silver, On the Edge.