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Picking good stocks is only step one to become a consistently profitable trader. And for most traders, exit technique is the toughest part. Many individuals say that to trade advantageously you need to develop the right mindset. Unfortunately, such winning mentality can only ever be developed through experience. Nevertheless there's a short cut to get through the learning curve without throwing thousands of greenbacks in the process. This short cut is playing POKER.

Yes you heard me right. Seemingly, playing poker has lots of likenesses with making an investment in stocks. First of all, they both deal with cash, uncertainties, and a keen judgment of potential risk and reward. In this post I'm going to explain the similarities and differences between securities dealing and poker. But before moving on, ensure you know the guidelines of Texas Hold'em and smooth with the terminologies.

Think of stock picking as attempting to find good hands to play. In Texas Hold 'em, you can look at the two hole cards and decide whether you can play the hand or not. Similarly, you can investigate the stock before entering a position. Fortuitously for you traders, nobody will raise pre-flop, so you just pay the commission. Remember to exit the position you also have to pay the commission, which implies that the price of entering a position is two times the commission. Good poker players only play good hands, so you need to do thorough researches before entering a position. One great point about trading is that you don't need to wait for good stocks like poker players wait for good hands, you can find good stocks on stock picking sites or using screeners to find them yourself.

After you call the blinds in poker, you get to see the flops and 2 more cards. Think of these cards as the performance of your stock after you enter the position. In poker, the flop can make a good hand, a medium hand, or a horrible hand (by helping your opponents). In trading, you can observe the possibilities of the stock as well , and you must impassively judge the drawback and upside potential of the stock. In poker, there are times that you've a good hand, and your competitor have a better hand, and you know you are beat. These are the times where your mind-set matters the most. A professional poker player will fold his hand with no regard for the sum of money he has put into the pot. As a trader, at times that you think the upside potential fails to effectuate, you should sell the stock without regard for how much you have lost. On the other hand, when a good poker player knows he's got the winning hand, regardless of the possibility of losing at the river, he would bet aggressively, without fearing the small losing possibility. In trading, this translates to if the stock goes up and manifests higher upside potential, you shouldn't fear that you're going to lose your current prize. Thus the winning mindset is to ride when the stock is going up, and sell when the stock is losing its heat. This discipline is simply said than done. So many times I've heard folk lost all their cash because they cling on to losing positions (due to pray) and sell winning positions too early (due to be afraid of).

By playing poker, you would get the opportunity to control your feelings, learning not to pray when you're beat, and not to fear when you're expedient to win. You wish to lose small and win big, not the opposite.

Now go practice. This mentality only develops with experience.

We have written a considerable number of articles such as Is Daytrading as a Living Your Cup of Tea and other best and trusty resources are all posted at Before Starting to Trade, Do You Know Your Broker? where you can also find our featured financier solutions.