Our favourite game can have a lot of lessons for us to pick on and apply to our trading and investing activities.
Undoubtedly, the FIFA World Cup, in progress now, is the greatest sporting spectacle of the world. But did you know, football holds a lesson (as does every sporting event) for markets: whether investing or trading.
First up, games like the one Germany played against Sweden tell us that one must never give up. The winning goal was scored almost in the dying minutes of injury time. In trading and investing, you need to wait for that one big scoring chance that can change the game. But patience is the key and remaining focused is necessary.
Similar was the situation for Portugal's Ronaldo when he scored with that free kick to avoid defeat to Spain. The magnificent free kicks of both Ronaldo (Portugal) and Kroos (Germany) saved the day for their teams. It shows that individual brilliance is needed but it has to be harnessed at the right moment if we are to pull through difficult times in any situation. Such brilliance comes from endless practice of skills. Hence if we have to triumph we need to possess skills that we can call upon when most needed. That can happen only with dedicated practice.
Germany has never lost at the league stage of the Cup in the past 80 years but they were quite rattled, losing against Mexico and just about winning against Sweden because their defence was patchy and full of holes. It’s a good lesson that even if you are a long time player in the game, it does not permit you to ignore basic rules of the game.
In trading and investing too we need to make sure that we don’t lose and we take adequate care to see that our defences are well-marshalled before we launch into an offensive.
At the same time, teams like Costa Rica and South Korea suffered because they had poor strikers and great defenders. We need to have all the skills to win- being able to defend is just one aspect. When the time comes to attack, one needs to have those skills as well- something that Belgium used with great effectiveness with superb forwards like Lukaku and Hazard and a few more.
Individually brilliant players like Neymar (Brazil), Mueller (Germany), Suarez (Uruguay) and Messi (Argentina) were unable to make their mark as they were heavily covered. This parallels with the market creating problems for even the most skilled players in trading and investing. And how one needs to raise the game when it is at a higher level in order to win. Strikers like Ronaldo and Lukaku managed to do it to some extent.
And of course, there is the aspect of luck. A few centimeters is the difference between a ball going into the net and hitting the goal post. The strike may be the same from a player but sometimes favourable wind conditions can make the ball curl that extra wee bit that beats the goalkeeper from saving the goal.
Everyone knows how to head off a corner ball but you need a little bit of extra luck to be able to leap that inch or two above the defender to aim it at the net. And you need that slight bit of luck to catch the goalkeeper on the wrong foot while sliding the ball in from near the goal mouth.
In the same way, despite all your skills, some slight luck will make you buy the stock before the big advance or sell it before that sharp drop. You need that luck to pick the right one from the sector that is moving that day or week so that, for the same effort, you end up with a greater amount of profit!
We have more exciting matches ahead. But the lessons for the markets will remain the same. Get the skill, practice that skill, know when to play offense or great defence, raise your individual skill to a higher level when demanded by the market and finally, acknowledge the role of luck so as to stay humble.
Enjoy the rest of the World Cup!To get trading recommendations from C.K. Narayan, click here.