Poker As a Whetstone
Good poker players are extremely analytical, as success depends both on an advanced understanding of the underlying probabilities of the game and a feeling for the nuances of human nature. Professionals spend a great deal of time studying their opponents, and characterizing their playing style based on two attributes: the degree to which they are conservative or adventurous with their money, called being “tight” or “loose,” and their general inclination toward passivity or aggression. Mapped on intersecting axes, they yield the quadrants Loose/Passive, Loose/Aggressive, Tight/Passive, and Tight/Aggressive: 
A Loose/Aggressive player, sometimes called a maniac, gambles wildly and without control. This player is a thrill-seeker, who plays to feel the rush and takes huge swings up and down, rarely having enough money to withstand the self-induced volatility and usually going broke as a result.
A Loose/Passive player gets involved indiscriminately but gives up easily, squandering small amounts of money over and over as the game goes on. This person, derisively labeled a calling station, wants to be involved but lacks commitment, making him an easy mark for aggressive players.
A Tight/Passive player will sit at the table forever waiting for the perfect situation that never, ever materializes. She is frequently referred to as a rock, is not inclined to get involved, and doesn’t like to take any risk when she does.
A Tight/Aggressive player will wait patiently until the odds are decisively in his favor, then act with maximum aggression to extract as much money as possible from opponents at the table.
Tight/Aggressive For The Win!
Most top poker professionals believe that Tight/Aggressive is the only winning behavior over the long run. More interestingly, elite players feel that a Tight/Aggressive approach to the game is not a naturally occurring set of traits. Very few people are intuitively disciplined enough to limit their participation to situations when they have a real statistical advantage and also willing to exert maximum pressure on their opponents. It is a learned behavior. A winning poker player has consciously, intentionally modified her decision making and approach to the game to be both more calculating and more aggressive in order to maximize the chances of success. This is exactly the right mindset for a professional trader, and the behavioral model maps perfectly.
A Loose/Aggressive trader is a thrill-seeking adrenaline junkie, swinging around in the market to satisfy a need for action, consequences be damned.
A Loose/Passive trader will always have some sort of a position, but never anything significant, and will tend to give up at the first sign of a loss.
A Tight/Passive trader is waiting, always waiting, for the perfect opportunity that just never quite seems to appear.
The Tight/Aggressive trader waits for the conditions to be favorable, and then commits to a strategy with a meaningful position managed in a tactical, controlled fashion.
The first thing strong poker players do when sitting down at a table full of opponents is, surprisingly, nothing at all. They will sit and watch the ebb and flow of the game for a half hour, an hour, or as long as it takes to preliminarily classify their opponents and to see how the game is playing at the moment. They will study the betting, the aggression level of the participants, and the quality of cards being played. They will listen to the players talk about how they played previous hands to gain insight into their thought processes, style, and skill level. They will see how much money is in play, and by whom, as an indicator of how much profit there is to be made. Finally, they will make a candid assessment of themselves relative to what they have learned about the game, its participants, requirements, and profit potentials relative to the risks involved. As the saying goes, “if you can’t spot a sucker at the poker table, then you are the sucker.” Smart players know when to stand up and walk away from a game that is too tough or that does not suit their style, even without playing a single hand. They also know when to settle in for the long haul if they find a situation that seems profitable.
Here is the previous paragraph again, with replacements in italics.
The first thing strong traders do when entering a market full of counterparties is, surprisingly, nothing at all. They sit and watch the ebb and flow of the market for a half hour, an hour, or as long as it takes to preliminarily classify their counterparties and to see how the market is trading at the moment. They will study the prices, the aggression level of the traders, and the fundamental information. They will listen to the traders talk about how they put on previous positions to gain insight into their thought processes, style, and skill level. They will see how much money is in play, and by whom, as an indicator of how much profit there is to be made. Finally, they will make a candid assessment of themselves relative to what they have learned about the market, its participants, requirements, and profit potential relative to the risks involved. As the saying goes, if you can’t spot the sucker in the market, then you are the sucker. Smart traders know when to stand up and walk away from a market that is too tough or that does not suit their style, even without doing a single trade. They also know when to settle in for the long haul if they find a situation that seems profitable.
 This common model for categorizing player behavior may have originated from Alan N. Schoonmaker’s grid-based system seen in The Psychology of Poker (Henderson: Two Plus Two Publishing LLC, 2000), 71-79.
From Chapter 1 - Know Yourself, Pages 11-13.
Excerpt from Trader Construction Kit Copyright © 2016 Joel Rubano. All rights reserved. No part may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the publisher, except by reviewers, who may quote brief passages in a review.