Trading is an arena that is rife with metaphors. Every so often some taking head or idiot broker will trot out Rothchilds remark about not buying until there is blood in the streets. Or you will be told to buy Sun Tze Art of War. If they are slightly better educated (doubtful) they might mention Meditations by Marcus Aurelius. The common theme is that trading is some form of conflict that needs to be won, that it is a conflict in which you have a tangible opponent. Such metaphors are completely and absolutely wrong.
If you want a metaphor about trading look no further than the game of golf. I should state at the outset that golf is not my sort of sport – you cannot pick up the ball run with it, kick it or more importantly run into other players. It is however a wonderful metaphor for trading. Golf is a game that is won by the player who makes the fewest catastrophic mistakes and your only opponent is yourself. All other things are irrelevant.
To get an insight into this you need not any further than this years current US Masters which has just concluded. This was a tournament that was not noted for any great play or charging runs but rather the actions of one of the games best. Ernie Els a champion of the past, winner of four majors and a staggering total of over $US66 million in prize money. It is fair to say that he knows what he is doing. During the first round of the tournament Els six putted the first hole. In simple parlance this is a train wreck of monumental proportions and is about as disastrous as it gets and you can see it unfold below.
As to the relevance of this to trading there are two things to note. Els knows what he is doing, his body knows what to in any given situation but his mind in the space of a few strokes came apart. This is no different to a trader who chases their losses – they are being defeated by themselves and their own psyche. It is not hard to switch the desperation of a golfer trying to get a small round ball in a hole with the frantic desire of a trader trying to regain lost money.
The second feature of this is that slowly Els regained his composure and slowly but surely built momentum. He missed the cut and went home on the weekend but he got his head back int he game. Obviously experience and technique had given him the skills to overcome the disaster of the first day and to slowly grind it out. This is no different to dragging yourself out of drawdown – you do it bit by bit, one trade at a time.
In such situations there is no one to rail against but yourself. There is no opponent other than yourself.