deterrence

Arrival of computer solvers in poker is in my opinion the most similar analogy to what’s happening in markets. average profitable retail trader right now = An old school reg in poker whos strategy relies on picking up reads on whether people “have it or not” when they’re bluffing and mainly playing like a nit, bluffing in small pots to make it look like he’s crazy but always having it in big pots against the whales who inevitably overcall. This player Can beat super soft line ups with decent edge. Think 2020 type line up in market. In poker, once the whales get killed, and fish leaves the table - there’s just other regs and pros left. The god tier status of skill in poker is two player types: - ultimate goat level: high stakes pro at the table, who came up from online. Years of grinding studying with computer solvers + multi tabling. AND having played tons of high stakes live games, knows how to exploit each player type at table with extreme adjustments from “balance”. In markets, the analogy for the multi tabling online pro is HFT+higher frequency quant prop trading operation. The best resourced, best talent, best tools, best tech. Lines blur here poker vs trading because it’s likely tier is the de facto tier above. Simply because it dominates at CAGR on the actual capital deployed. Somewhere around there in top tier are also Phil Iveys of poker, rare outlier individuals with some incredible innate AND incredibly studied and honed skill to play the game. Usually from the outside it looks like they are intuitive etc. however nowadays all of them do a lot of solver work - so don’t have to choose either or. @SimonRusso__ is the best example I could think of. A rare combination of self awareness, willingness to study the full depth of detail, and incredible human composure to execute. There are active traders out there with incredible ability and skill. I know some of them directly. They are like elite live pros in poker. Will lose in online formats (trading every day) to the online pros (HFT) multi tabling zoom, but can exploit the specific live lineups (especially whales and fish) to the highest degree, better than online pro can. So their live edge in specific spots is the highest. Back to the soft average reg - he is expected to be losing EV to the strong pros but he makes even more from exploiting the whales and fish making the overall deal +EV. Once the whales and the fish stand up from the table (typically that happens when they get killed or bleed out) -> It becomes -EV for the reg to still sit there. He should stand up. The general lesson from what happened in poker is that as line ups get tougher, your strategy needs to become more precise, finely tuned across all of its decision nodes. And it typically needs to have more nodes if it aims to be optimal or close to. OR you need to only sit down when the whale does. Unlike poker, you don’t have to pay rake and can stand up from the table any time and sit down only to play the best hands. This is still and will be the lowest hanging fruit available in so far as edges go. Luckily the markets have far more whales and fish of varying sizes. Arguably in infinite supply. I suspect it’s mainly due to the fallacy that people think markets price world events and react to news predictably, and also everyone is a gambler at heart. From personal experience, some of the wealthiest people I’ve met tend to in general think that due to their personal success, they have an edge and think their opinion on the market or world events is very valuable. It seems to me they underestimate the “skill level” of their opponent which is the market. Theres also a lot more scope for hugely profitable strategies due to the fact the optimal equilibria are not known as the trading game has too many degrees of freedom amongst other reasons. This correlation between poker and trading, the ecosystems and how they evolve is interesting to ponder. Food for thought.