On Form and Technique (in Poker and Trading)

Think of poker as a martial art. (Trading too, but let’s start with poker first.)

The metaphor is appropriate on many levels: You have one-on-one confrontations. You have gain or loss of profit comparable to gain or loss of honor. You have emotional pain comparable to physical pain. You have displays of dominance and submission. And disparities of skill, training, discipline and talent are the main determinants of long run outcomes.

If you are a winning poker player, you also have something else drawn from martial arts: Ritualized discipline.

The martial artist is steeped in ritual discipline. It begins as soon as he enters the dojo. By the time he steps on the mat, his body, mind and spirit are all prepared for combat.

As a poker player, the poker room is your dojo. The table is your mat. When you walk into that room, or as you make the journey from home to room, you are in a state of mental preparation. When you sit down at that table, the fighting begins.

At the poker table you never know how big a hand is going to be. Most confrontations are small, with quick withdrawal. Sometimes hours go by where little of consequence happens. But a major confrontation could come about at any time. In the next five minutes, half your stack (or the whole thing) could be at risk.

It’s perfectly fine to be relaxed. You can’t spend hours in a permanently keyed-up state. But you need to be combat-relaxed, not kicking-back-with-a-beer relaxed. The difference is huge.

You want your mind, body and senses in peak form during a fight. You want your head clear, distractions put aside, so you can make razor sharp decisions and act fluidly in the moment.

Think how different this is from the average poker player mentality. The drinkers, the slackers, the late night addicts. The sloppy tourists hoping to “get lucky.”

And think of the similarities to trading, where there are sins of comission and sins of omission. Missing a true opportunity, due to lack of vigilance, persistence, or preparation, can be as harmful to your full-cycle P&L as taking an unnecessary large loss.

Most traders do not understand this. Like the average poker player, their attitude is somewhere between motivated and lackadaisical. They are more interested in having fun or killing time than being a serious competitor.

You can certainly have a lot of fun being a serious competitor — but it’s a different kind of fun. Think of the “fun” of a pick-up basketball game on a barbecue weekend after having a few drinks, talking smack with your old buddies, versus the fun of preparing for, and winning, a championship. Same game, different worlds.

The martial artist is further instructive in that he makes substantial long-term investments in form and technique. One could argue that the essence of any martial art IS form and technique. Much of martial arts practice is the execution of Kata, a Japanese word which literally means “form.” Via Wikipedia:

Kata originally were teaching and training methods by which successful combat techniques were preserved and passed on. Practicing kata allowed a company of persons to engage in a struggle using a systematic approach, rather than as individuals in a disorderly manner.

Poker players and traders have Kata too. Or at least they should…

The more that form and technique are perfected, the more that proper reaction becomes intuitive. As such, martial arts are grounded in the concept of automaticity, by which your mind, body and muscles use hard-wired routines to execute complex patterns on command.

Automaticity, coupled with experience, is the difference between master and novice.

In chess, grandmasters use “chunking” to quickly recall grouped patterns. As such, while the novice expends great amounts of conscious energy to analyze six different possible moves, the master effortlessly dials in to the extensive library of patterns in his subconscious mind, realizing that only one of the six possibilities truly makes sense. The novice thus expends significant time and energy, while the master’s decision is almost effortless.

The way to get from here to there is practice, contemplation, and absorption of patterns.

Poker players do much the same thing, as we noted in our piece Breaking Down A Market Edge  Thousands of decisions, some of them made very quickly, add up to a powerful compound edge (or not) depending on the form and technique of the practitioner.

And of course traders do the same. Dickson G. Watts said: “Genius consists of seeing instantly the vital point.” But by that definition, genius in the context of a craft is something we all can aspire to. “Instantly seeing the vital point” is a matter of form and technique, coupled with vision and experience.

Such is why master practitioners can make huge decisions in a matter of minutes, or even seconds, whereas the lesser skilled might agonize for days. As Gary Klein puts it:

There was a decision point. He didn’t experience it as a decision point because for him it was obvious what to do. That’s what 20 years of experience buys you. You build up all these patterns, you quickly size up situations, and you know what to do, and that’s why it doesn’t feel like you’re making any conscious decisions.

How do you get to that exalted state, where your decision-making process is less a sweaty struggle and more like Neo fighting off Agent Smith with one hand in the final scene of the Matrix?

Unlike in the movies, there are no shortcuts. You practice, and contemplate, and practice some more. You learn the proper forms, the Kata, from someone who knows them. And then you do the hard work of creating the literal, physical neuron and synapse structures within your own brain that allow for instant access at a future time.

This is why Bruce Lee said: “I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.”

The first (practicing 10,000 kicks once) is dabbling, like drilling an endless series of shallow wells. The second (practicing one kick 10,000 times) depicts a relentless focus on mastery of form and technique.

It is not just practice, but perfect practice (or as perfect as possible, aiming toward a perfection asymptote ideal) that creates optimal subconscious patterns. And it takes time before the dividends compound via embedding in your subconscious mind.

Form and technique are also beneficial for ensuring that you don’t skip analysis steps. Think of the flight checklist for an experienced pilot. The pilot may have many thousands of hours in logged flight time, but he still goes through the checklist. Completing the checklist is part of the form.

In fact the pilot, the professional poker player, the skilled trade and the martial artist know something important: Intuition is channeled THROUGH form. It is form that lends shape and structure to intuition, much as  bones and skeletal structure create a form for muscles to hang on.

The need to emphasize form and technique first, prior to inution, was a key point made by Eugen Herrigel in Zen and the Art of Archery.

In old Japan, the master art of calligraphy was taught with a brutal focus on form, no creativity allowed at first – not to crush the student’s spirit or to make him a robot, but so that proper form and technique was absorbed into his bones. From that point, training became a means of expressing creativity to the utmost: The mind could conceive a thought and the hand could simply carry it out.

Let us look again to the utter failings of most poker players and traders, who, we must remember, are 90% losers. The average poker player falls into one of two traps. He falls into the conservatism trap, thus becoming a “rock” or a “nit.” As such he fails to utilize creative opportunities, and then wonders why waiting for big pocket pairs is not enough. At the other end of the spectrum, the average player may become an “aggro,” a “baller” or even a “maniac,” in which case his chief failing is sloppy use of aggression and something called “fancy play syndrome:” Intuition run amok, with no form or technique to back it.

And what about the average trader? Again we see the same essential binary trap. Either the trader is too conservative and fearful, not using enough creative leverage to make efforts worthwhile… or the trader is too sloppy and overly intuitive, not guiding intuition through the refining and purifying lens of form and technique.

The ultimate is to have what Bruce Lee called “form that is no form.” At the poker table this means you are impossible to “peg.” Opponents who play with you day-to-day cannot classify you as existing within any preset patterns.

Some days you appear to be a rock. Other days you appear to be a bully or even a maniac. But truly you are just flowing with opportunity, using all angles to get the best of it. You are the opposite of predictable.

For the trader, “form that is no form” means comfort with a multiplicity of styles and timeframes, from the quick swing-trade of three or four days time, to the large-scale trend position with a three-month window, to making deep value investments that may reap dividends over years or even decades.

It is no accident that reaching this level of accomplishment takes real understanding, real mastery. To move among forms and styles, you need true knowledge, true understanding, on a deep and connected level. You need that depth of experience, awareness and contemplation that lets you “see” like Neo seeing the patterns in the Matrix, not through some magical transformation but the hard work of building those building blocks in your mind. And being the focused competitor the whole time, not the proverbial beer drinker as discussed.

When Bruce Lee talked about “form that is no form,” he was referencing a path similar to that of the calligraphy student. We would argue — and we think Bruce Lee would agree — that “form with no form” is not the rejection of form. Rather, it is the transcendence of any one form, to intelligently combine multipleforms… which requires study and awareness of them all.

Again, you start with a deep focus on form and technique. You learn the forms deep in your bones. As your knowledge and experience base solidifies, you branch out. And then, thus trained, you use your mental energy and awareness to advance to even higher levels, elevated by the scaffolding of hard-won automaticity.

This necessary investment in proper form and technique is one of the reasons poker, learned to repletion as an art, is such an excellent training ground for trading. Having learned discipline, fluidity and focus in one area, the mind then has a foundation for advancing to more challenging areas with a sense of structural familiarity.

Another reason is the speeding up of time cycles. In time cycle terms, one hour at the poker table is comparable to a week’s worth of trading. If you play a hundred hours of poker, you will experience a roller coaster of ups and downs, emotional challenges, highs and lows, opportunities for extreme profit and extreme risk control, that might take two years to collect in a trading setting (this is one reason why manually backtesting your system is such a valuable practice).

On an ultimate level, the best thing is understanding the ‘why’ behind every rule, every subconscious aspect of the form. Knowing the structural logic of various form and technical elements facilitates subconscious buy-in. There is reduced or eliminated temptation to break form because its value is known.

This is especially important with ‘endless river’ type activities like poker and trading where the flow of opportunity never stops, most opportunities are booby traps in disguise, and you are surrounded by opponents both saying and doing foolish things.

As such, the poker player who gets his style and technique cues from his opponents at the table will be a loser, because recreational poker players are 90-95 percent losers, even at the higher stakes. Is it any different in trading? We think not.

The form and technique investment becomes even more important, then, because to become a winner you have to go against the grain of most of what you see and hear.

The need to embrace winning form and technique by rejecting the habit and mindsets of the ubiquitous 90 percent cuts against natural human inclination. As a tribal animal, the natural instinct of nearly every human is to do what his or her fellow humans are doing, particularly the ones in close proximity.

In a highly successful professional environment – like, say, a sports team or a military unit – this peer emulation instinct is beneficial, as excellence born of form and technique is reinforced across the group. But in poker and trading — both zero sum games or even minus sum games — the peer emulation habit can be self-defeating and self-destructive, unless one chooses one’s peer group very, very carefully.

Many would-be poker players and traders have experienced the cognitive frustration of conflicting advice. One person or school says it is okay or even highly advisable to do ‘X’, where another school of thought says you should never do ‘X.’

For example, in no limit hold ‘em one train of thought says it is okay to play short stacked. Another school (ours) says it is foolish to ever play short stacked, that doing so unacceptably limits your weaponry and toolkit.

Or in trading and investing, one group says market corrections can never be identified in advance, and that your aim as a serious long-term investor is to grit your teeth and ride through corrections, not sidestep them. Another school (ours) says this is crazy, that mounting danger signs should be noted and heeded – and that risk control for the sake of avoiding severe losses is half the battle if not two thirds of it.

The differences could go on and on – there are countless examples of different thought schools on all manner of things poker and trading related.

Just remember the vast majority of form and technique advice, to the extent it is absorbed offhand, comes from losing sources. As such, question conventional thought processes that lead to conventionally bad results. In fact, go ahead and question all thought processes, conventional or not.

Too many traders practice “10,000 different kicks” to use Bruce Lee’s phrase. Too many poker players muck around at the edges of understanding — the math, the strategy, the emotional control — without really digging deep.

This is the realm of dabbling and indecision, a sort of Bermuda Triangle of losing mediocrity where all too many stay for their entire trading and playing careers, if not their entire lives. Picking one school means, by definition, not choosing the other schools, and cutting out the babbling cacophany of voices. At some point every serious practitioner does this.

Think about your own form and technique. How well developed is it? How clear is it? Do you “know who you are” as a trader? Do you accidentally emulate the habits of losers, or do you make a conscious effort to restrict outside influences on your style and actions?

If you haven’t yet found the form and technique that you will learn to repletion, that will serve as foundational bedrock in your quest for mastery, are you at least on the path to seeking it? Are you putting one foot in front of the other?

Becoming a winning poker player is not easy. Becoming a winning trader is not easy. Anyone who tells you so is full of shit, selling something, or both. The demands of form and technique provide clarity as to why.

In any domain where 90 percent of the players are net losers, fed on a diet of conventional advice, it should be clear that the ten percent (if not the five percent) are doing something different. But it is not just a different moving average, or a different set of rules. It is a different focus, a different mindset — a different starting point, coupled with long-term investment in form and technique, sometimes taking many years to pay off.

In light of all the above, think again about the “ninety percent loser” level. Now let’s be brutally honest, and bump it up to ninety-five percent. Because that is probably closer to the cold hard truth, when you cut out not just those who are net losers but those who don’t make enough profit to really be worth it. Ninety-five percent washout or failure rate! What an intimidating thought! Or is it?

A ninety-five percent failure rate can be recast as one out of twenty. If you can do things that nineteen out of twenty traders can’t do, you can be one of the five percent. Hell, if you are simply willing to do things that nineteen out of twenty poker players or traders aren’t willing to do, you can be one of the five percent.

It isn’t rocket science. It isn’t genius level mathematical equations. It’s consistency and discipline and passion and hard commitment to form and technique, as discussed at length above. Are those things enough to create a “one out of twenty” separation?

The answer, at least to us, seems an overwhelming ABSOLUTELY. Look around you. The lack of discipline, lack of true follow through, lack of real passion and consistency in this world is overwhelming, more common than air pollution. One out of twenty isn’t a cakewalk. But it seems more akin to sticking to a disciplined and motivated goal — like losing twenty pounds and becoming physically fit — than becoming a superhero.

Our vision for what is possible — the reality of what is possible in trading, and in poker, and in life — is why we created the Collective. It started as a way to share knowledge. The act of sharing itself was seen as beneficial, at first, because we realized such would sharpen our own game. To properly teach all we know, we would have to deepen our own mastery.

Then we saw the possibilities for community. The interaction of fellow traders, with us and with each other. The establishing of new connections, new friendships. The filling in of knowledge gaps. The bonding and camaraderie, the shared commitment to excellence, the communication and deep conversation that mere materials alone could never match.

If we can train traders, and if we can teach them and get them on a true path of mastery, and foster a “conspiracy of excellence” that produces huge compound dividends… We can fulfill our mission and mandate — to conquer markets and have a blast doing it — while having as many fellow traders as possible join us on the path.

If this hits home with you… If you’re walking the path of mastery and are determined to become a 5 percenter, then join our Collective. And walk this path with the MO crew.

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.


Investing & Personal Finance

AK is the founder of Macro Ops and the host of Fallible.

He started out in corporate economics for a Fortune 50 company before moving to a long/short equity investment firm.

With Macro Ops focused primarily on institutional clients, AK moved to servicing new investors just starting their journey. He takes the professional research and education produced at Macro Ops and breaks it down for beginners. The goal is to help clients find the best solution for their investing needs through effective education.

Tyler Kling

Volatility & Options Trader

Former trade desk manager at $100+ million family office where he oversaw multiple traders and helped develop cutting edge quantitative strategies in the derivatives market.

He worked as a consultant to the family office’s in-house fund of funds in the areas of portfolio manager evaluation and capital allocation.

Certified in Quantitative Finance from the Fitch Learning Center in London, England where he studied under famous quants such as Paul Wilmott.

Alex Barrow

Macro Trader

Founder and head macro trader at Macro Ops. Alex joined the US Marine Corps on his 18th birthday just one month after the 9/11 terrorist attacks. He subsequently spent a decade in the military. Serving in various capacities from scout sniper to interrogator and counterintelligence specialist. Following his military service, he worked as a contract intelligence professional for a number of US agencies (from the DIA to FBI) with a focus on counterintelligence and terrorist financing. He also spent time consulting for a tech company that specialized in building analytic software for finance and intelligence analysis.

After leaving the field of intelligence he went to work at a global macro hedge fund. He’s been professionally involved in markets since 2005, has consulted with a number of the leading names in the hedge fund space, and now manages his own family office while running Macro Ops. He’s published over 300 white papers on complex financial and macroeconomic topics, writes regularly about investment/market trends, and frequently speaks at conferences on trading and investing.

Macro Ops is a market research firm geared toward professional and experienced retail traders and investors. Macro Ops’ research has been featured in Forbes, Marketwatch, Business Insider, and Real Vision as well as a number of other leading publications.

You can find out more about Alex on his LinkedIn account here and also find him on Twitter where he frequently shares his market research.