As well as trading on the Football Index, I also play a lot of online poker. This week I have been thinking about how my experience in poker really helps me on the Index.

Playing Tight

Most good poker players adopt some variant of “tight aggressive” play. A “tight” player generally plays around 20% of the hands they are dealt. So 4 out of 5 times, they fold straight away. Simply put, they are only playing when they have the cards that make them favourites to win.

I can spot a bad player a mile away because they are playing with 50% and even up to 90% of their hands. They want to be involved in every round whether they have good cards or not because they would get bored otherwise. These players are nicknamed maniacs and are always losing players over the long term. They literally bankroll the entire online poker industry. I will stick around and play with them all day because it is a matter of time before I walk away with their stack.

On the Index, I trade “tight” too. I do my research and make sure the odds are in my favour before I buy. This means having the discipline to not do anything for days, even weeks when I need to. But when I trade it is because hard evidence from detailed research suggests I am very likely to make money. I never trade because I want to ‘play’ or because I want to add some excitement to a match day.

The equivalent on the Index of being a “loose maniac” is buying and selling too often, particularly when chasing tonight’s (or even yesterday’s) dividends. It so rarely comes off. Even when picking the Index’s most consistent football players, the odds of picking one player to win the Buzz often out of hundreds of players are usually very poor. You will generally get better value just backing your player to score at the bookies.

But when you play “tight” and hold players with the strong underlying stats that make them likely to win again, it is pretty much a matter of time before they start paying you back. The question I ask is “how many times is my player likely to win this season on average?” not “will my player win today?”

Playing Aggressive

Another feature of good poker players is that they are “aggressive”. Because they are only playing with the top 20% of hands, they can afford to be bullish when they do bet. If people challenge them, they will stick in the hand as long as the odds stay on their side.

On the Index, if I think I have found a gem of a player at a value price, I will go in hard with a sizeable chunk of my bankroll. And I will not fold and sell at the first sign of resistance either.

Bad poker players can often be “passive”. They might play “tight” but will still be reluctant to challenge others even when they have very strong cards. In Index terms, they might buy good players but sell them too quickly if any mild misfortune hits. Even worse players are “loose passive”. They throw money around liberally even with bad cards but will back down to any resistance straight away. The equivalent on the Index would be being quick to buy a player with weak supporting evidence but then selling as soon as they hit any minor speed bump.

Both these types of trades will severely drain your profits, even if you only slip into it occasionally.

But when the facts that made us buy the player change, we need to be prepared to sell even at a loss. In poker, bad players find it embarrassing to back down and treat every round as a personal showdown. Good players will just let it drop if they think they don’t have it and move onto the next hand.

Eliminating Leaks

In poker, a consistent mistake or weakness in your game that frequently causes you to lose money is called a “leak”. The best poker players devote a significant amount of time to analysing and plugging their leaks. They will generally review every game, particularly the hands they lost, to work out where they went wrong.

For the same reason, traders should keep at least a basic spreadsheet record of their trades. At minimum, your buy price, buy date, sell price and sell date. You could also track the decisions you made on a player (i.e December 5, chose to hold after injury to Ronaldo).

Optionally, with a few very simple formulas you can easily calculate the total profit/loss on one of your deals including commission and dividends. The basic system on the Index that shows your portfolio doesn’t give you the detailed information you need.

By doing this, you can really evaluate your best and worst trades and get a true picture of your performance. You will be able to spot consistent mistakes. Maybe you are prone to panic selling an injured player only to see the price rebound on you. Maybe you habitually sell a player only to have to buy him back for even more later on. You won’t really know until you write it down because we all kid ourselves about how good we are.

About six months into my time on the Index, I started taking it more seriously. I started analysing my trades properly and it was fascinating. It really reinforced my belief that trading “tight aggressive” is by far the most profitable method for me. The lessons I learned to optimise my profits were:

1) Make fewer trades;
2) Be even more thorough in your research;
3) Commit to the trades you do make with a good chunk of cash;
4) Be patient and let them grow, do not sell just because of a short term dip.

What would your trade history tell you?

If you find this post useful please like the post on Twitter or share using the below buttons. You can also follow me on Twitter at @_FI_trader for additional daily thoughts and tips.

FIT