In honor of the Masters, and inspired by a recent Currensee tweet, let me draw some parallels between golf and trading. I’m not a golfer. The extent of my playing has been a whopping total of 9 holes. I do watch the game, though, especially the majors. I mean come on! Who doesn’t enjoy watching Tiger Woods pull amazing shots out of seemingly nothing and just dominate the field when he’s on his game?
Anyway, it’s risk control that comes to mind when watching even the best players in the world play. Good golfers understand that things can go bad very, very quickly. It’s much harder to get birdies than to get bogeys. Moreover, the best possible score you can get on a given hole is a 1 if you get a hole-in-one. There’s no limit to how bad a score you could make, though. Methinks I see some commonalities with trading there.
Experienced golfers have a very similar mindset to experienced traders. Sure, they take their chances and go after opportunities when presented. No risk means no opportunity for gain, after all. They do not (mostly) take stupid, needless risks, though. You will often hear them talk about making sure they don’t make six by doing something foolish when the situation strongly suggests that a five is going to be a good score.
That sounds to me an awful lot like cutting your losses short. Good golfers know that sometimes they just have to accept their lumps and not let things get any worse. Similarly, good traders know that staying in a trade that’s gone against them in hopes that it comes back is a good way to end up with an even bigger loss.
Good golfers know how to grind out the results. Good traders do exactly the same thing. Both develop a plan of action and execute it. Sometimes things go well and you get that really good shot – that really good trade. Sometimes they go against you. Sometimes you do something stupid and it works out well. Most of the time doing something foolish means bad news.
How often do you see a golfer make one bad mistake, then completely lose it? They go from having a good scoring run to suddenly getting a series of bogies and double bogies. It’s not that they’ve changed anything mechanically in the matter of a couple of holes. They just lost it mentally. Their confidence went completely away. Sound familiar? Think Rory McIlroy on Sunday.
There are two things that really make good golfers and good traders stand out. The have a plan and stick to it, and they quickly shift their focus to the next shot, the next trade. The past doesn’t exist. What you did on the last shot or trade doesn’t matter. It’s only about how you execute the next one.
You might be thinking that someone like Tiger is all about skill. While it’s hard to argue that he’s a better shot maker than most, it’s also true that Tiger practices and seeks to improve his game relentlessly, not just in terms of swing execution, but also in round management and decision-making. Good traders, ones seeking trading mastery, do exactly the same thing.
So the next time you’re on the course or watching a round on TV, think about the parallels to trading. It’s another way to learn and find ways to get better.
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