Trading is often compared to performance sports. And why not since both have commonalities in terms of fear, anxiety, confidence and risk taking.
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Most individuals look at sporting personalities and envy their riches but few look at the effort they have put in – mentally more than physically. Competitive sports and trading are both more mental pursuits than skill at the highest level. In sports while there are various levels before a player can compete at the international level, in trading in any market in the world every trader is betting his skills with the best in the world. This makes trading one of the most difficult endeavours for a novice to start as he would most likely be taking a position on the opposite side of a top performing trader. It is therefore necessary to understand the attributes in a successful sporting personality that can be applied to a trading.
Trading is often compared to performance sports. And why not since both have commonalities in terms of fear, anxiety, confidence and risk taking. It’s ultimately the will to succeed that will be the differentiator. The legendary basketball player Michael Jordan hits the nail on the head when he says ‘Some people want it to happ=en, some wish it to happen, and others make it happen.’
Everyone who enters the market wants to be profitable, but few want to work to consistently make money. They prefer to rely on third party research or take a brokers’ call or pay for some service which gives tips rather than learning the trade. In his book ‘Outliers: The story of success’ author Malcolm Gladwell mentions the 10,000 hour rule. In his study of successful personalities across any field he finds that everyone of them have put in 10,000 hour of dedicated and deliberate effort to achieving their goal. The same rule is applicable to trading. No wonder there are few consistently successful traders.
Of those who are willing to learn the strategies and analysis, many drop out the moment they meet a series of losses. A few hurdles in terms of stop losses and rookie trader jumps to a new strategy or fiddles with his money management rules. Compare this with cricket. Even the best batsman does not score a four or a six with every ball he faces. There are many misses, many singles and two’s with an occasional shot to the boundary to his credit.
But a rookie investor is keen on making a good amount of money on every trade he takes. He would pre-empt an event and take position before the actual event has unfolded. Like a professional sportsperson who would make the other player commit and then make his move, a professional trader would wait for the event to take place and then react.
It is this unreasonable expectation from every trade that leads to failure of most of the traders. In the game of tennis or table tennis, even the best player loses points. In fact in matches among most of the top players the match goes on to the final set and almost to the last point. The one with the strongest head wins, there is little to separate the players in terms of skill set at the top level. There is only one error that separates the winner from the loser. What makes the winner successful is his ability to hang on there, trust himself and move on with the game. The legendary tennis player Billie Jean King is often quoted as saying ‘Champions keep playing until they get it right.’ The same rule applies for trading.
Many successful traders have the most simplest of strategies but have complete faith in it and keep on following it irrespective of the occasional loss. Failing is not often failure, unless you refuse to learn from it.
A quote often repeated by sporting coaches is - your best teacher is your last mistake. One has to learn from their mistake and see to it that it is not repeated. By making all the mistakes one can and learning from it and avoiding it, will finally lead to time when there are not many mistakes left to be made. It’s only then that one can become successful.