Dominated Hands

Regardless of the way in which your hand has improved on the flop it is important to watch out for hidden aspects of the situation that could destroy your apparently good progress.

In Texas Hold’em this could arise because although you have flopped three of a kind your opponent may have flopped a flush or a flush draw.  This type of situation is the most difficult to get out of because although your own hand has improved (in some cases significantly) you are dominated by another player and so have effectively lost and are “drawing dead”.  It is difficult to realise such situations but you need to develop this skill and then act appropriately, usually by folding, if it arises.  As a rule, the following types of flop are dangerous because of the possibility that your good flop hand is dominated.

• 2/3 cards of the same suit
• 2/3 connected cards
• A pair on the board
• All high cards on the flop

In these cases you will require a particularly strong hand to continue playing, especially if there is strong betting from any of the players on the table.

In investing, a similar situation arises when company may have announced excellent results, but there are some lingering doubts over accounting methods that it has used to achieve these results – the classic example that many investors can relate to is Enron, or more recently the shares of banks such as Washington Mutual.  There could be significant doubt over the real strength of the results, in the same way that in Texas Hold’em poker your “Enron” three of kind appears to be strong but has been compromised by the flop helping an opponent to make an even better hand.

Another example is when a company performs well with respect to its own operations but is affected by an external factor such as commodity prices.  A classic case is the airline industry, where good results and efficient operations by the carriers are constantly compromised by increases in oil prices.

In Texas Hold’em it is easy to determine possible opponent hands that dominate your own from rigorous analysis of the flop.  In investing you will have to set your own rules about what possible indicators show that despite an apparently profitable situation that you are likely to lose on the trade.