Wednesday, April 29, 2015

Pinball, Poker, and Trading: Perspectives on Going on Tilt

Bella at SMB offers some excellent perspectives regarding trading on tilt.  Tilt is a term that originated in poker and describes a state in which sheer frustration with the game takes over and distorts one's betting.  As I noted in an earlier post, trading on tilt is a function of our outcome expectations.  If we are not emotionally prepared for the possibility of losing, we are more likely to be thrown by losses.  We set ourselves up for the tilt state by needing and expecting to win, rather than letting probabilities play themselves out and accept that there will be winning and losing periods.

I recall becoming an avid pinball machine junkie in college and watching players become frustrated to the point where their own tilt led them to throw their machines into tilt.  My first book describes how I never really succeeded consistently at pinball until I discovered a quirk in the machine I was playing.  If I let the ball hit my left flipper and did absolutely nothing, the ball would bounce to my right flipper.  From the right flipper, I could swing the ball through an area of the table and it would ring up points and send the ball to my left flipper.  Once again I would do nothing, the ball would bounce to my right flipper, and I would swing the ball through the scoring alley.  One time I repeated this so many times that I won 32 free games in a row.

I never went on tilt and I never put my table into tilt.  The game became pretty emotionless, because I was repeating a technical maneuver over and over again.  I got to the point where I almost always won free games.  I never really mastered pinball machines; I just became good at finding and exploiting quirks in machines.  The best quirks came from doing something that no player would normally do, like not use your flipper when the ball came your way.

There's an important lesson there for trading.

Further Reading:  Regaining Self Control