Which is more mental: Trading or Golf?

By: ispeculatornew
Date posted: 08.13.2010 (3:43 am) | Write a Comment  (3 Comments)

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I think one of the main reasons why many top athletes end up being very good traders is because of two main factors: competitiveness and mental strength. Both are difficult to quantify but they are a major part of success in both arenas and while athletes that are mentally strong get recognized, it is not always the case with traders. When Roger Federer hits a big serve on every break point or Mariano Rivera saves the day in the most intense of circumstances, fans and media alike will both credit the “mental strength” of the athlete. And if you ever had doubts about the importance of this mental strength, this year has provided the perfect example…

Tiger Woods

The American golfer, deemed as the top player to have played the game by most experts, has obviously lived through many tragic events in recent months. I will not be talking about the specifics because unless you’ve been on another planet, you’ve heard plenty about his marriage problems. In fact, even if you were on another planet, you probably heard more than enough. But back to his golf. I think we would all agree that Tiger Woods has not lost his technique, his precision, his touch, etc. All of the physical capabilities that made up the most dominant athlete ever by many accounts are still there. He is young, has not suffered any major injuries and remains to this day the best golfer. That being said, for the past few months, Tiger’s golf has been below expectations. In fact that is quite an understatement. His gold has been suffering from the worse slump of his career by very very far. He’s had more bad performances in the past few months than in the past 7-8 years. If his body and skills have not changed, what has? I don’t think anyone would doubt that his dedication to the sport is now bigger than ever. Tiger is trying to regain control of his life through golf by showing his fans all around the world that he is back and fully recovered. Clearly, that is not the case. Tiger’s focus and mental strength have been hurt so badly that he is now playing at the level of the average PGA player…. How can someone go from the best of all time to average at best?

Yes, psychology and mental strength do matter in sports…

I think that Tiger Woods provides the latest, but also the clearest example of how critical mental strength is in sports. There have been many examples in the past in every sport known to man, of players having mental breakdowns and never recovering.

Another good example would by Rick Ankiel, a major league baseball player. He was a dominant minor league pitcher, drafted #5 in the draft and started off his career at age 20 with very impressive numbers. In 1999, in his rookie season, he had an 11-7 record, 3.50 ERA (10th in the league), 194 strikeouts (7th) and came in second in the rookie of the year voting.

Then, on one day…everything changed within a few minutes. In the playoffs of 2000, Rick Ankiel lost it in the 3rd inning,… he was no longer capable of pitching strikes. He faced 8 batters and gave up  4 walks, 5 wild pitches… bad day at the office right?

In his next start, he threw 5 wild pitches in his first 20 and was taken out of the match. Following those two appearances, Ankiel tried to resume his career and went down to the minors but never was capable of throwing strikes. To give you an idea, in 4.1 innings in the minors, he walked 17 batters and threw 12 wild pitches. He did end up regaining part of his game but never enough to become a start in the league. How did one of the most promising pitchers end up not being able to throw a strike overnight? Do you still have doubts about how important mental aspects are in sports?

In case you are wondering, Rick Ankiel is still in Major League Baseball, but no longer as a pitcher…

But the same is true for trading

Trading can be quite challenging mentally, both when things are going well and when they aren’t. There are so many traps that must be avoided when trading:

Discipline: Sticking to the system
Greed: Not bending rules looking for always bigger returns
Looking for home runs: When a trader is losing money, it can be very tempting to take extra risks to win back those losses
Holding losers: It can become very tempting to keep a losing trade until it “turns around”
Overtrading: Looking for quick results with displaying patience
Trading on history: You get in trouble when you start trading based on the results of other trades.
Overconfidence: Taking risks based on the assumption that you have “superior skills”

Keys to being mentally strong when trading

There are many important things to consider when you are trading in my opinion:

-Avoid emotional decisions: As much as possible, avoid trading on emotion
-Create trading rules that must stick to (entry points, stop losses, etc)
-Do not makes exceptions..once you start there is no end
-Do not doubt your system every time a trade goes wrong.. no system is perfect, the goal is winning more than losing

I’m no exception

It’s always tempting to give a few more days to trades that break the -20% stop loss… Always is. But sticking to the system has worked well so far. But it is a daily challenge to remain mentally strong and avoid the big traps. Now my question is if you have experienced similar challenges and how you manage them. The initial question was which was a bigger mental challenge; golf (and sports in general) or trading. I think both can be equally challenging…any thoughts?

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3 Comments

  1. Comment by Zavi — August 13, 2010 @ 6:45 am

    Everyone has been building outsized expectations for Ankiel, especially himself. Poor guy!

    To answer your initial question, yes both is equally challenging!

    I’ve done tennis competition. Mental toughness is key when I was playing. I was not being competitive against my opponent, but against myself. I play well in practice, but when comes the tournament, I have to play safe, I have to be confident enough to make some risks. Sometimes I win, sometimes I fall 😉 And big tennis players are the ones that can be tough mentally every games!

    I think to be a good trader, you need to be consistent. It’s pretty hard, for that you need to be mentally strong, to believe in your system and like you said, cut losses and have positive P&L.

  2. Pingback by DGB Roundup — August 13, 2010 @ 8:10 am

    […] Intelligent Speculator asks, Which is more mental: Trading or Golf? I’d say both. What do you think? 2. Next Bubble to Collapse: The Canadian Housing Market is […]

  3. Comment by IS — August 13, 2010 @ 10:23 am

    @Zavi – Thanks a lot for posting that, very interesting:)

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