2 Free Online Games that Have Helped Me Become a Better Investor. So Im in the middle of reading the " A Man of for All Markets" by Edward O. Thorp, and its fascinating. Hes a mathematician who proved there was a potential edge in blackjack (21) based on the cards that were left in the deck. He also went on to be investing fund manager who focused on covered calls and warrants and had a consistent track record for 20-25% annual returns. But his logic covered in his book focused on not only the odds of winning but the sizing of bets in both playing games and investing.
Risk management and bet sizing is not spoken about enough in life I believe. In the age of YOLO and wall street bets, clearly its not celebrated enough. A YOLO bet is a massive bet because 'you only live once'. how silly mathematically and how foolish from a consistency basis. Been there done that.
Bet sizing is key for survival. If you cant endure and survive long enough to be massively right, then your out of the game.
In the video I share 2 games that I think are awesome for practicing these concepts. I really I had learned to play and practice these concepts in games like this in college or high school. Its a math simulation. the Coin flip game is fantastic for learning how to manage risk and bet sizing. The Cashflow game by rich dad poor dad is awesome for taking investment habits and cash managements and applying them into a mini lifecycle that rhymes with real life.
If youre new to investing, or just sharpening your skills, I definitely recommend both games.
Not the most familiar approach you take, but it was nice to see how you think through the publication. Thanks for your work, absolutely supportive!
ReallyMe
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First, thanks for sharing the post. Definitely very insightful and thought provoking. Please keep up the good work! Been thinking about this: Is there even "a math" for games of chance? What would the rules be? Is it possible to perform a "reductio ad absurdum" to strictly predict or even prove market behavior in the future? I'm really curious... The best thing I've personally read on this subject so far was the book "The Man Who Solved The Market"... 'cause if all this stuff doesn't exist then there's no point in trying to learn from it. Just like you could watch the raindrops to predict the weather in a month. Haven't decided yet...
optionfarmers
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@ReallyMe part of the math could be know your risk per decision. Know that u may have bad odds and not know it.
optionfarmers
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@ReallyMe, games of chance, random distributions, coin flips, stock market drift, odds of market move in either direction, volatility pricing of options, of course there is math in all of this. focusing on the "drops" to predict the ocean doesnt seam productive. but focusing on large sample sizes of drops could be :D its essentially what elections polls are.
ReallyMe
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@optionfarmers, True, there is definitely math involved in games of chance, stock markets, and other random distributions. I agree that understanding your risk per decision is a critical part of that math. It's also important to know that while individual outcomes may be unpredictable, large sample sizes can reveal patterns and probabilities that can inform decision-making. This is why election polls, for example, can provide valuable insights despite the inherent unpredictability of individual voters. So while it may not be possible to strictly predict or prove market behavior in the future, understanding the math behind random distributions and risk management can certainly help inform investment decisions and increase the likelihood of success. Regarding the analogy of watching raindrops to predict the weather, it's important to understand that while individual raindrops may not tell us much about the weather, patterns in rainfall areas and other meteorological data can certainly be used to make weather predictions. Similarly, while individual stock movements may not tell us much about the market as a whole, analyzing patterns and trends over time can provide valuable insights and help one make informed decisions.