To: @EpicaCapital who wrote (6847 ) 9/6/2014 12:46:11 PM From: @EpicaCapital Read Replies (1) | Respond to of 6873 Professional Gambling Lesson for Traders: Before reading this article, for background, it might be helpful to read these two prior articles I wrote: My life’s defining moment: >>> Message 29282626 The long road home: >>> Message 29338991 My whole adult life is revolved around professional gambling. I had a vision/epiphany at age 13 and a dream at age 18, which I pursued ever since and would/will never settle for anything less. Initially I didn’t really even fully understand what professional gambling was, but in 1984-1985 the definition became crystal clear to me. Professional gambling is the act of making highly educated/analytical wagers for profit in games of skill and chance, where the gambler has a very clear advantage. (important point >>> gambling in a casino or sports wagering have negative expected long term returns and is not professional gambling, but rather donating) In my 20s I became a world known expert in strategy/skill/statistical precision at poker, backgammon, gin rummy and hearts. I had incredible success at these games, but at times a great deal of incredible financial swings/drawdowns as well (was dead broke 3 different occasions). These games became my life until I started full time trading in 1998. I learned very quickly and very early in my professional gambling career that knowledge/skill/strategy was crucial to success, but there were MANY other things just as important. I will discuss many of these things at some point in the future, but in this article will focus on one very specific topic: Game/Opponent Selection. Financial swings in professional gambling are just part of the game. They are to be expected as streaks come and go, as skill games are still games of chance. The object of course is to continuously make money while keeping the financial swings at an acceptable level. If the opponents were good players, my overall advantage in any particular game was reduced significantly, while the volatility of the outcome became significantly higher. If the opponents were weak players, my overall advantage in any particular game was increased significantly, while the volatility of the outcome became very low and in many cases even zero. (also, if I beat up the good players, the word would get out of my skill level and the weak players would avoid me) So I had to camouflage myself and concentrate on the weak players, until that pool ran dry and only then would I play the better players. Also, while playing with weak players I wanted to play for the largest stakes possible because of my ENORMOUS skill advantage and expected volatility being almost zero over a course of a long playing session. In the late 1980s I came to NYC where nobody heard of me in the gambling circles. I immediately joined 2 gambling membership clubs (which combined cost about 4k per month just to walk in the door) First one was the Cottery club, a place for very wealthy members who enjoyed gambling at various games, main ones being backgammon, gin rummy and hearts. Second was the Mayfair club, which offered many higher stakes poker games and occasional backgammon. I kept a very low profile and initially concentrated strictly on the fish. I never made so much money gambling as I did the first 6 month in NYC, I simply crushed the fish. The Cottery had a daily hearts game for very sizable stakes (50 times larger than I ever played before) with clueless players. In 6 months I never lost a single day, problem was I killed the game so much everybody stopped playing it because of me. At the Mayfair I avoided the huge stakes poker game because it had too many good players in it, meaning not enough of a meaningful advantage for me. Instead I played in a highly unusual/rarely played type of poker game there, that all pros avoided and didn’t understand very well. The game was dealers choice, high low split, with a chip declare at the end to announce whether you were playing high, low or both ways. This game was a specialty of mine, a game I understood probably as well as anyone in the world. I played 26 times in that game, never losing once and every single time was the BIG winner and I mean BIG. At this point, the management of the Mayfair barred me from playing in that game ever again as I broke the game single handedly. After 15 months in NYC I moved on to Miami, where nobody heard of me at the time. ---------------------------------------------- Now I want the reader of this article to truly think about its content in stock trading terms and my trading style. The crossover is simply enormous. Why concentrate on trading mid or large cap stocks? How much advantage does one have trading something everybody knows inside and out and many analysts follow? (there are obviously exceptions and I certainly trade exceptions) Why not focus on small caps instead where few analysts provide any clarity, if any, and your own research/understanding of the company is crucial? (this is my main focus of trading) Why not focus only on excellent trade setups, where your advantage is very substantial (like me)? Instead of lots of average setups with minimal advantage and minimal gains. Why not become highly selective in your trades? (like me) Why not trade these highly selective, excellent, highly advantageous setups in significantly larger size? (like me) Perhaps trading larger size in highly selective advantageous setups offers significantly less volatility, rather than more? Why not pursue a dream of HUGE trading success (like me), instead of being a piker satisfied with minimal gains? Etc……… Anyway, the reader hopefully understands the important points of this article by now. You want HUGE success, then PLAN FOR IT !!! Not like its going to fall on your lap from the sky !!! Dream the Dream, Live the Dream and Never Settle for Anything Less !!! Happy Trading Michail Shadkin @EpicaCapital