Today, I plan to share the investment insights Benjamin Graham, Warren Buffet’s mentor, gleane...
Five Things Traders Can Learn from a Tennis Champion
09/17/2010 12:01 am EST
As I was watching Rafael Nadal put away Novak Djokovic this past Monday night to win his first US Open, I couldn't help but compare the qualities he has leveraged in improving his game to that of an aspiring trader. Nadal has literally willed himself into becoming the best tennis player in the world, amazingly enough, at a time when the best player possibly in history (Roger Federer) is still in his prime. I was at the US Open earlier this week and marveled at how easily Federer positioned himself for each shot, and the best word I could use to describe him is “efficient.” Nadal however, can be best described as a machine that doesn't quit. As I broke his game down, I realized that so many of the qualities he possesses have a corollary in the trading world.
Expand Your Playbook
When Nadal burst onto the scene, he was a dominant clay court specialist. Despite the incredible success early in his career on clay, his game needed improvement if he wanted to duplicate his success in other venues. He worked very hard to not only improve his serve, but also his net game to the point where each of these areas are now pluses, on top of being the top baseliner in the game. He eventually won Wimbledon, which is an incredible accomplishment for a player groomed as a baseliner. With the US Open under his belt, he is also one of the few to accomplish a career grand slam.
A trader should not get too comfortable with only one set-up, as the market will eventually change and render that set-up less effective. Traders should constantly look to expand their playbook in order to have options in adapting to the markets. Being great at one play is very important, and should not be minimized, but traders should be willing to stretch themselves in order to improve.
As I was watching the final set on Monday night, they mentioned that Nadal hadn't made a single unforced error in the final set yet. I think he ended up with a single error in the last set when it was all said and done. This is flat out ridiculous. Nadal was playing someone who was at the top of their game and slugging it out toe to toe for many 20-plus-shot rallies. This is probably one of the biggest reasons he is at the top right now. He doesn't give away points; he makes the other player earn it.
As a trader, you must eliminate needless mistakes. It is hard enough to take money consistently from the markets, let alone if you are struggling with mistakes. Common mistakes could include trading sub-par set-ups, letting stops slide, or not sizing a position properly. Make sure your trading methodology is clearly defined, and then trade it well.
Play Every Single Point
Another amazing quality Nadal has is the unwillingness to give up on a point. I've seen Nadal up 40-love, standing three feet behind the baseline when his opponent hits a drop shot. This is a scenario where many players would concede the shot, content to be up 40-15 on the next point. I don't think I have ever seen Nadal concede the shot. He hustles for every ball, which forces his opponents into more errors as they try to hit perfect shots.
As a trader, you certainly don't want to overtrade, but your job as a trader is to take advantage of opportunity when it is presented. You can't do this if you are not at your desk waiting for each opportunity. Beyond just being there, you must be prepared, whether that entails pouring over charts before the markets open or running through potential market-moving news events. It takes a high level of concentration to be able to sit and watch the markets for hours on end, especially when it is dull and lifeless, but all it takes is one single opportunity to make a trader’s day.
Stay in Excellent Shape
Nadal may be in the best shape on tour. He slugs away for hours on end, and may hit the most balls overall on tour. If you think about it, his game is predicated on prolonged rallies that he usually wins. You must be in excellent shape in order to withstand four- or five-hour matches several times in a two-week period.
While a trader doesn't have to be in the same physical shape as a world-class athlete, being in good shape helps a trader remain balanced through the day, and traders should definitely be well rested. One of a trader’s most important qualities is the ability to stay focused. Remaining focused is much easier when a trader isn't dealing with ups and downs of a high-sugar diet or dealing with only a few hours of sleep. While a trader can certainly deal with being tired once in a while, they will surely have frequent concentration lapses if they are in a constant battle with their diet and rest schedule.
Traders who are not happy with their performance should take a hard look at themselves and ask are they working hard enough. Nadal could have been content to win a few French Opens and hang around long enough in other tournaments to get some decent payouts, but he kept working at improving his game. He has managed to become the best player in the world, and is already on his way to becoming one of the all-time greats. When someone is this successful, it is never simply from talent alone. The Michael Jordans and Tiger Woods’ of this world do happen to be talented, but they also outwork their peers and are never satisfied.
Traders should constantly be looking for ways improve their game, as the market is one opponent that is also constantly evolving. It's also worth noting that a trader’s biggest adversary is themselves, much like any athlete who performs in a non-team sport. It is not that easy to have lasting success in this field, but the ones who do have certainly adapted by constantly improving themselves.By Joey Fundora, trader and blogger, Downtowntrader.blogspot.com
Related Articles on STRATEGIES
I spend a lot of time talking about block trades. These are the huge trades that show up on your opt...
I have been tracking a set-up for the SPDR Gold Trust ETF (GLD), which I analyze as a proxy for the ...
AllianzGI Equity & Convertible Income Fund (NIE), which yields 6.8%, invests in convertible equi...