There is so much similarity between professional athletes and traders that many consider trading to be a sport. In fact my performance coach, Ben Newman, mostly coaches professional athletes. Professional sports have a similar type of pressure to execute and perform as day traders. At the World Cup this summer, we are seeing athletes attempting to perform on the highest stage with the whole world watching. There so much to be learned from these athletes on how they react to mistakes, their psychology, and how they bounce back after. Let’s talk about Messi’s poor performance (his penalty kick was saved by a part-time film director) vs Iceland, and what lessons we can learn about it as traders.
If you didn’t watch the Argentina game on Saturday, Messi had a game to forget. He is considered by many to be one of the best players to ever play the game, but he missed a penalty kick at a crucial moment that would have put them 2-1 up. However, Messi has two more games to focus on to get his team out of the group stage. Mistakes are inevitable for athletes in all sports. All athletes at some point make a huge mistake. How they bounce back from these setbacks is what separates the good from the great. It will be interesting to see if Messi is able to brush off this setback and achieve peak performance in his next two games.
1. Take Out The Emotion
As a trader, you have many setbacks. Losing trades are inevitable, and there will be days where you will feel like quitting. You may have even had a big trading loss where you lost a significant portion of your account. How you react to losing trades is what separates winning traders from losing traders. Getting emotional after a losing trade has huge consequences. Emotional traders will typically oversize their positions, take random trades on setups they have no edge, and miss a great setup because they are too emotional to see the setup in front of them. Just like how Messi has to be able to bounce back from his penalty miss, just like you have to be able to bounce back from losing trades. Learn more about how to bounce back from trading losses in this article here.
2. Recency Bias
A big issue many traders and athletes deal with is battling recency bias. Recency bias is the tendency to “more prominently recall and emphasize recent events and observations than those in the near or distant past.” Messi has two more games to play. If they don’t win either of these games, Argentina will likely be eliminated. If Messi lets the recent events affect his performance in the upcoming games, he will lose his chance to win a World Cup this year.
Recency bias is a huge issue for traders as well. Trading is a game of probabilities. If you have a strategy with an edge, you know that over a large enough sample size you will make money if you execute your strategy how you are supposed to. However, if you let recent losing trades affect your ability to execute your strategy, you will end up taking big pullbacks in your account’s equity. Every trade is independent of the last. Just like how every shot is independent of the last shot for Messi. You must not let the last trade affect what you do in the next trade.
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