Before we talk about investing and TradingHD, let’s talk a little about how they relate to poker: You’ve no doubt heard many top players talk about how poker is a game that you’re never really the “master” of. That’s because every time you sit down to play, you’re necessarily faced with a series of new situations and opponents, forcing you to constantly review ideas, gather new information, and try (every time) to form a winning strategy for the new circumstances you’ll face.
It is possible to play poker without constantly studying your opponents and actively learning how best to counter them. It is even possible to sometimes win at poker without always being so attentive. But those who play this way – ignoring or only partially adapting to what their opponents are doing – are really just betting that their previously learned formulas will work for them again.
The best poker players are always looking for new ideas on how to win this game. They are armed with insights strategic of what has worked and what has gone wrong for them in the past, and they are also always ready to revise their positions when information presented suggests that they should change.
Studying with TradingHD
The best poker players are a lot like the wisest investors. They are also equally as attentive when it comes to conducting research and developing new ideas on which to build winning investment strategies. This is a thesis explored by investment consultant Raoul Pal in his new online course for TradingHD – “How to Invest by Researching Ideas”.
As Raoul explains: “It’s one thing to know about the various portfolio structures and how they work, but it’s much more important to have a good idea with which to build a profitable investment strategy – that is, an idea that has been well researched and is therefore more likely to make these frameworks profitable.
Consider a poker player who has played enough to know that it is generally more profitable to play from late position than from early position. Knowing this, the player plays more hands from the cutoff and the button than from the blinds and under the gun (UTG). But then let's say the two toughest opponents at the table are sitting to this player's left, meaning that any time he opens from late position he will probably get tangled up with one or both of them.
The intelligent player – like the wise investor – has come to this idea about the higher skill level of these two opponents through “research” or studying how they play. The player then uses the idea to adapt going forward, perhaps avoiding getting involved in hands with those players, or looking for opportunities to exploit their aggression when out of position, or finding some other way to deal with the situation.
What we are talking about is much more challenging than simply understanding that “late position is good”. We are talking about something much more demanding, which requires genuine effort and “research skills” in order to develop a specific approach to winning.
Raoul’s TradingHD course focuses on helping investors learn how to conduct research in order to discover and develop their own sound investment ideas. As an advisor and consultant to governments and investment firms around the world, Raoul brings over two decades of experience to the course, having previously worked for investment banks and the world’s largest hedge fund firms.
Pal has a wealth of experience teaching others how to develop investment ideas, too, including publishing “The Global Macro Investor,” an elite macro economic research and investment strategy service. He is also a co-founder of Real Vision TV, the first financial web TV channel. His course also draws on the expertise of legendary global macro traders like Stanley Druckenmiller and Paul Tudor Jones, people like Pal himself who have worked in the past on how to best research investment ideas.
Interestingly, Pal’s course – consisting of seven video lectures – takes the would-be investor through four stages of researching an idea that in many ways resemble the four steps a poker player might go through when “researching” others at the table and forming the best idea to play against them.
Step 1: Researching an initial idea
Pal’s expertise lies in macroeconomics – meaning he’s good at looking at the “big picture” and is more often doing that kind of work than investigating a single company. He’s also one of those who likes to look at the data or “start with the charts” as a first step toward building an investment idea.
In the online course he does just that, starting with some analysis of recent trends (as reflected in a couple of price charts) as a means to trigger further avenues of investigation to help explain the reasons for the patterns demonstrated on the charts.
This is very similar to: noticing a pattern starting to emerge at the poker table and filing it away in a way that is basic, but it needs even more investigation. Take the two tough players sitting to the left of our aforementioned player. He sees them check-raise post-flop a few times, this is part of another piece of information he is gathering about them, helping to suggest that they are not passive and in fact appear to be more creative than the average opponent.
Step 2: Homework (More Research)
From here Pal talks at length about studying further what’s behind a potential investor’s observed pattern. We’ll leave the details of his example aside, but share his point; that more research can help clarify the meaning behind the patterns you initially observe. And, more importantly, how you’ll sometimes find that the investigation changes or contradicts what the chart pattern might superficially suggest.
Going back to our player's research into the game with these two challenging players sitting to his left, he can discover through a series of confrontations that have taken place up until the Showdown that one of them plays out of position with really strong hands – that is, he doesn't necessarily play creatively, as suggested by the previous impression. Meanwhile, the other has shown 2 bluffs, confirming that he is very aggressive and/or loose (as suspected).
Step 3: Understanding the “Knock On Effect”
Having performed the first two steps of “research,” Pal explains, the investor now knows much more than the “average” about not only what the patterns are, but what is causing them. This understanding of causality in the market—or how one thing can have a “knock-on effect” on another—gives the investor the ability to anticipate what will happen next, which not only sets that investor apart from others, but also greatly increases the chance of making a wise, profitable investment.
You can see how this idea applies to our poker game, where the attentive player is prepared to respond the next time one or other of his left-hand neighbors tries another check-raise.
Step 4: Implementation
For the investor, the next step is to apply all of this study and implement the fully researched idea into a portfolio framework. Once again, Pal is careful to stress the need to be thorough and methodical before testing your idea, as well as to be prepared for the possibility that even after you have evaluated all the probabilities your idea may not be correct, or that it will need to be revised later.
Likewise our player has reached a place where he is now able to put his “well considered” or idea into practice, implementing what he has learned about his opponents and using that study to play against them in what is hopefully a profitable production fashion.
As Pal points out, many new investors aren’t willing to do this extra research. They see a headline that suggests an idea with investment potential and act immediately, without bothering to fully research it beforehand. There’s a word for what these investors are doing that also applies to the unobservant poker player: putting in the work and actively thinking at the table and “researching” ideas for how to play a winning strategy.
Translated and adapted from the original: Learn How to Study Your Opponents with TradingHD’s “How to Research Investment Ideas”
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