Simple Trading Strategies You Can Learn from Sports – Introduction

Trading is a game and most games have similar characteristics. In a game, two sides compete and there can only be one winner. In every game, there are people or teams that have a history of excellence performance. For example, in athletics, Usain Bolt of Jamaica is a good example of an expert in the 100 meter race. The same is true in swimming where Michael Phelps has won several Olympics games. In soccer, a team like Manchester United has an excellent track record in winning.

However, in sports, performance is not always on a straight line. It fluctuates. For example, although Bolt is the fastest man on earth, he recently lost a match. The same is true with Manchester United which has not won its leagues in the recent past.

All this is true when it comes to investing and trading. This weekend, Wall Street Journal published an article on Jeffrey Gundlach, who is the current Bond King. He is a person who has a proven track record when it comes to investing in bonds. However, his performance is currently waning and some of his investors have started to redeem their funds. This is a story we hear so often. Bill Ackman, founder of hedge fund, Pershing Square Capital, grew his assets under management to about $20 billion. Today, his hedge fund has less than $10 billion in assets. This weekend, New Yorker wrote a scathing article on Carl Icahn, who is one of the richest hedge funds in the world. This year, he has lost money despite being a special advisor to the president.

All this does not make these investors weak. Like sport, they’ve had their best moments and now they are in another phase of their business. In a similar way, you will have highs and lows and by following sports principles, you can become a better trader.

  1. First, sport teams and athletes take their wins as a launchpad for future success. For example, when you are an athlete and you win a match, the easiest thing for you to do would be complacency. You can rest and believe that you are the best. This is wrong because as you rest, the people you defeated are adding more effort to beat you the next time you meet. Instead, you should add more effort. As a trader, whenever you have wins, it is perfectly okay to celebrate them. However, you should celebrate for a short period and then focus your energy on future wins.
  2. Second, sports team take losses as motivation for future success. Athletes make money when they win. Those who don’t win championships don’t make anything. Therefore, they understand that failing to win can have serious implications on their careers. Consequently, whenever they lose, they take it as an opportunity to further improve their skills. As a trader, you should always take your losses as a lesson. Instead of being discouraged, you should add more effort to win next time.
  3. Third, exercise is very important. In fact, no team in history has become a success story. Athletes like Michael Phelps and Usain Bolt spend tens of hours every day practicing. They spend hours watching videos of their competitors. They also spend countless amount of time with their coaches. This is a vital lesson for all traders. It is important for you to spend time researching and practicing on your trades. If you are a quant trader, you should equally spend a lot of time developing strategies and algorithms. Doing all this will make you a better trader.

If you run a trading floor, you can learn a thing or two about staffing from sports team. Sports team that do well have the best talent. They spend vast amount of money creating a team. Recently, Brazil’s Neyma was bought by PSG for quarter a billion dollars. In essence, they saw the talent of Neyma and placed a bid that they believe is worth his skills. A look at teams that win shows that they always do the best that they can to have the best talent. As a trading floor operator, you should always ensure that you have the best traders.

Simple Trading Strategies You Can Learn from Sports – Useful Tips:

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