Trading Lesson From the Links

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  • on April 17th, 2011

I realize the blogosphere has no need for another “trading as a sport” post.  But fresh off my annual Myrtle Beach golf trip, I’m writing this to remind myself of some similarities and important differences between market speculation and golf.

Having not picked up a club in 6 months, I went out and shot 76…absurd given that I’m not very good.  For whatever reason, I was locked into a great tempo and my wrists lacked the strength that can turn a straight drive into a duck hook.  As the day went on and I knew I had a special round, great care was taken to make each shot count.  I made no mental mistakes that I can recall, and other than a double bogey on 17 when I caught the water I struck every ball as cleanly as possible.

Fast forward to day 2…I topped my first drive, and drives that found fairways the prior day found trees on this day.  I wasn’t sensing disaster at 7 over par through 6, but then it struck.  Having hit 2 decent shots into the wind on a long par 5, I still had 120 yards in and grabbed a gap wedge.  My partner drove off for his ball, and feeling the 2 club wind in my face knew I needed more club.  Too lazy to go get the right club, I hit a solid shot but came up short.  Instead of a birdie putt, I had stuck myself with a chip shot, the hardest to execute when you’re rusty.  I skulled it across the green, then came at the downhill chip shot with a timid effort that left me 8 feet downhill.  Of course I blew that past and missed the comeback.  A hole that was likely a par became a triple bogey because of one thing…mental laziness.

At this point my thoughts turned to trading, and I was jotting notes in my phone to remind myself how important it is not to allow this to creep into my trading.  It only takes 2 minutes of laziness to set off a chain reaction of events; in this case not grabbing the proper club led me to a tougher shot than my game was able to execute, followed by a failure to at least leave myself with an uphill comeback instead of a scary sidewinder.  Rattled, I chunked it into the water on the next hole and made double bogey before the act of writing these notes helped me regain clarity for a respectable final 11 holes.

There are a number of reasons I’ll never be that good at golf…I hate practicing, and 4 hours is a long time to maintain focus when a 2 minute mental timeout can ruin your day.  In prepping and executing trades, however, I can go into 2-3 hour bursts of focus that match my brain’s tolerance, then step away for 30 minutes to recharge.  Trading involves a ton of emotions that need proper channeling, but unlike golf we can call a time out to regroup; the residual effects from undisciplined entry or improper position size are too great to skip these mental breaks.

I’m sure others have cited better examples, but to me the game of golf is closest to trading in how much the execution is decided more by the mental state than the physical one.  The last time I played 2 days in a row was on this trip last year, when I shot 77 then 107…there’s no way the physical part of my game was that much different from one day to the next.  Just as some days in the market have us patting ourselves on the back, some days we just feel stupid.

I think it’s clear that the proper balance of 1) attachment to our process and 2) detachment from the outcome, is shared by both sports, and that mental laziness is the greatest threat to our success.  Our “pre-shot routine” guarantees nothing, but at least the consistent execution of this mental aspect puts us in position to execute when our swing is on.  It may seem tedious compared to the drama of the action, but it’s the only part of the process in which we have control.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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