Editor's note: You need to have the right mindset when you're trading...
It's tempting to simply buy every appealing stock that catches your eye while building your portfolio. But you could be doing more harm than good in the long run.
According to Ten Stock Trader editor Greg Diamond, knowing when to buy and when to hold on to a trade is just as important as knowing which trades to make.
In today's Masters Series, updated from the June 20, 2023 Weekly Market Outlook, Greg shares poker tips that he learned from a professional player that are valuable lessons for every trader...
You Have to Know When to 'Hold' Them
By Greg Diamond, editor, Ten Stock Trader
My college roommate, Steve O'Dwyer, is one of the best poker players on Earth. His career earnings in the card game surpass $45 million.
When poker became popular enough to be broadcast on ESPN more than 20 years ago, he and I got hooked...
We'd play $5 "hands" on Thursday nights on the East Carolina University campus.
Now, while I enjoyed the game, Steve took things to an entirely different level. He bought and read every poker book he could get his hands on and became obsessed with each facet of the game.
In fact, after we graduated and most of our friends got jobs in traditional industries, Steve booked a one-way flight to Las Vegas.
We thought he was crazy.
After some initial ups and downs, Steve proved to be quite talented in the poker world. Going from a broke college kid playing $5 hands to a multimillionaire is a big accomplishment.
I'm happy for my friend. He put in the work, cast aside the doubt and the haters, and lived his dream. Not many people can say that in life.
I tell this story because poker and gambling are often closely associated with trading. But I always provide the same insight to those who make the comparison...
If you're reckless and trade with no strategy or discipline, and you don't manage risk, then, yes, trading is very similar to gambling.
But professional traders always employ smart strategies and risk-management tactics. They also exercise patience to make sure they don't cross over into the gambling mentality.
Longtime Ten Stock Trader subscribers are familiar with my trading strategies... I always provide position-size recommendations and stop-loss levels.
I also constantly update subscribers on my game plan in relation to our technical strategy. I don't trade just to trade... That would be gambling.
But interestingly, poker does provide some relevant lessons for traders...
Today, I'll share two important insights from my friend Steve to help us better understand both the current market environment and our trading strategy.
Let's get started...
Years after Steve and I graduated from college, I traveled to Las Vegas to visit him. By this time, he had won a few poker tournaments and was climbing the earnings list.
Naturally, we hit the poker tables after I arrived.
But I also picked his brain about a few key mistakes that many poker players make... And interestingly, everything he described aligned quite well with professional trading.
On that trip, Steve provided two valuable tips that I want to share with you today...
First, too many players play way too many hands.
Steve admitted that poker is a grind and that many lose patience with the effort... They only want to experience the excitement of winning.
But the odds suggest that "good hands" don't come around often, so you should only play when the odds are in your favor.
The same thing is true in trading.
I can't tell you how many e-mails I've received lamenting the trades we could have made. But overtrading can be detrimental to overall trading success.
This mentality, and the type of investment behavior it cultivates, explains why a lot of traders fail.
Yes, there's always another trade coming your way, just like there's always another poker hand to be played. But if the odds (or, as I say in trading, the "probabilities") are not aligned with your strategy, you won't benefit. In that case, you shouldn't execute the trade.
My "favorite" e-mails come from folks who believe they don't have enough trades at a given time.
The name of my trading service says it all... The "Ten" in Ten Stock Trader means I don't like having more than 10 trades at once.
If you bet on too many hands in poker, you're likely to lose. The same thing applies to trading options... If you buy too many options, your capital can quickly evaporate.
The bottom line is, you shouldn't overplay. Follow your trading strategy and manage your risk... Patience will lead to success.
The second tip Steve shared with me during the Las Vegas trip is one of the more popular insights among poker players...
Know when to "hold" them.
That means if you have a winning hand, hold the cards and bet accordingly. You should do the same thing in trading...
Right now, patience and discipline are critical. As we inch closer to April and May, my game plan is to buy puts on strength.
That's where Steve's second tip – knowing when to hold them – will pay off.
Now, we can apply important insights from one of the best poker players in the world to our game plan... to better understand the current market environment, our positions, and the Ten Stock Trader strategy over the next few months.
Best,
Greg Diamond, CMT
Editor's note: A new wave of market volatility is here. Investors are fleeing to the exits to escape the turmoil, but Greg sees an opportunity.
He's using a time-tested strategy that earned him 116% in 34 days... and 100% in 17 days. Now he's looking to make a similar trade again.
In Greg's 2026 Market Crash Summit, you can learn how to position yourself to take advantage of the volatility while everyone else panics. Click here for the full details.
