With the Superbowl weekend ahead of us, we take a look at what football and trading have in common and what we as traders can learn from the players. Football is much more tan throwing a ball around and running across the field; just like trading more than clicking a mouse and buying some random stocks. Here are the 8 lessons traders can learn from football.
1. Your stop is like your quarterback
You need to guard your quarterback and not bluntly expose him to your opponent’s offense. He has to be in a spot where he is hard to hit because once he is down, the play is over – however, the game isn’t lost.
Success is not forever, and failure is never final. – Don Shula
When your stop is hit, your trade is over, but you don’t have to give up trading. You’ll get another chance to score. Re-group, figure out how to approach your next play and then execute the plan.
2. It’s not over until it’s over
Only a few more minutes on the clock, your team is leading and it’s your play. Your team played at their best level all game long and did not make any major mistakes. But then, you are unfocused for just a few seconds and throw an interception – the other team makes the final score, just seconds before the game is over.
How often did you write a detailed trading plan, waited patiently to execute the trade and then saw that price almost made it to your profit target? Then suddenly price starts turning, but you decide to wait it out – it still looks alright. Then, you widen your stop a bit so that price can turn around but it just keeps going and you have to take a major loss.
Every quarterback can throw a ball; every running back can run; every receiver is fast; but that mental toughness that you talk about translates into competitiveness. – Tom Brady
3. Small scores add up if your defense is good
Not all teams are blessed with a strong offense line, but having a great defense can be equally important. When your defense stops your opponent from scoring frequently, even scoring small can bring you the win. It might not look spectacular, but only the outcome matters.
If football taught me anything about business, it is that you win the game one play at a time. – Frank Tarkenton
In trading, you don’t have to go for the 20x winner. If your risk management is on point, little gains will easily add up over time. As long as your winrate and reward:risk work together, a controlled and conservative strategy can bring great results without the added risk.
4. Know when to take a loss
The best quarterback can read the game and he understands how to minimize the damage that can be done to his team. If he can’t find a receiver and his opponent’s defense is coming for him, he can throw the ball out of bounds to avoid a loss of yards and get another try instead of forcing a bad move and risking an interception.
How often did you have the feeling that price is coming for your stop loss, but you decided to wait it out? Finally, your stop got hit and you could have reduced your loss by closing the trade earlier. If things don’t look great, there is no need to take a full loss.
5. You can’t win all the time
During a game, there will be dozens of individual plays. It’s obvious that you can’t win all. If you easily lose focus or go on tilt after a lost point, you won’t be able to bring you’re A-game when it’s your turn. You have to stay in control at all times and continuously make the best possible decisions.
There are only three things you should ever do about a mistake: Admit it, learn from it, don’t repeat it. – Bear Bryant
Over the course of your trading career, you’ll take hundreds and thousands of trades. You can’t allow yourself to put too much emphasis on individual trades. Never allow one single trade to have a significant impact on your trading performance or your emotional state.
6. Pick your play wisely and keep adjusting
Before a game, teams have a good idea of how to make their plays; they have a detailed playbook with pre-planned and endlessly practiced variations, tailored around the strengths and weaknesses of their particular opponent. However, the best teams know when it’s time to adjust and change the plan. If they see that something isn’t working, or if they can spot a new weakness, they are ready to change and capitalize.
A trader should know his core trading strategy, what defines his strategy, how his perfect trade looks like and when he performs best. But, when pro traders see that conditions are changing, they are not stubborn; although they won’t change everything completely and start trading a new strategy, they’ll make small adjustments to stay flexible.
7. Peak performance
In professional sports, you only stand a chance if you perform at a peak level. Players don’t go out drinking and partying the night before a game, they understand the importance of practice and preparation and professionals are always willing to go the extra mile.
To be successful, all you have to do is work half-days; you can work the first twelve hours or the second twelve hours. – Don Shula
Trading is a very competitive and complex business. If you just spend two hours every evening flipping through timeframes, trying to find a good setup, you won’t make it far. For most traders, their effort does not reflect the level of success they are after. Audit yourself: how serious are you really and do you deserve to be profitable based on your effort?
8. It’s a team effort
A quarterback is only as good as the players around him. An unbalanced team with only a single star player will not achieve any level of success.
Traders focus too much time and effort on finding better entries and indicator signals while neglecting the importance of risk management, overall discipline, trade management and journaling. A trader will never achieve any level of consistency if all he does is hunt trade signals. An unbalanced approach will always lead to inconsistent results.
Teamwork is what the Green Bay Packers were all about. They didn’t do it for individual glory. They did it because they loved one another. -Vince Lombardi
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