On this U.S. Open Championship weekend I thought it appropriate to discuss golf and how it relates to trading the stock market. I can think of at least 5 ways that golf can help your trading…there are probably many more.
1. Both are a game of inches. I was on the driving range yesterday and overheard a couple of players talking. They were talking about their round and the ups and downs that they experienced.
As they were about to leave one guy said, “you know it really just comes down to the 6 inches between your ears”.
I thought that’s a pretty good assessment of golf and the same applies to trading. Manage what’s going on between your ears and it will make a big difference in trading the stock market or any market for that matter.
As Mark Douglas says in his book, The Disciplined Trader, “The more sophisticated you become as a trader, the more you will realize that trading is completely mental. It isn’t you against the markets, it’s just you.”
2. How low is your handicap? In golf your level of ability is measured by your handicap. If you have a single digit handicap you are a very good amateur golfer.
It means that you are probably shooting around 80 or less when you play. To get to that level takes years and years of practice. To be a professional golfer is on an entirely different level.
I’ve read that to obtain a high level of success in just about anything, takes about 10,000 hours. That came from Malcolm Gladwell’s book, “Outliers”. It is an interesting theory.
So in trading the stock market, how low is your handicap? Not sure there is a specific way to correlate it. You might try logging and measuring how many hours you are putting into trading to get some sense of where you are.
10,000 hours equates to doing a task full-time or about 2,000 hours/year for five years. If you can only devote 1,000 hours or 19.2 hours/week for 52 weeks then it will take 10 years.
3. Emotions under control? When I started playing golf as a teen, I didn’t keep my emotions under control as well as I would have liked but I never threw my clubs in the water or slammed one into a tree.
It’s just really easy to get upset and mad if things don’t go well. As soon as that happens your round of golf is ruined. You cannot play well when you are tense, upset and emotionally keyed up.
The same goes for trading the stock market. That is why more and more traders are using meditation to keep the mind clear, calm and relaxed.
But meditation aside, it is just important to keep your emotions under control. When the emotions get out of control, you try to get revenge, put on trades you shouldn’t put on and try to get your money back. It usually ends badly.
4. Frustration Management. I think about the times when I hit that perfect shot with a 7 iron and it was coming right in on the flag but a gust of wind came up and pushed it into the trap.
Or I nailed a beautiful drive…hit a squirrel on the head and bounced into the woods. (just kidding about the squirrel, maybe a sprinkler head) There are any number of frustrations on the golf course.
To play good golf you just learn to manage them and go with the flow. The same thing happens in trading. How many times have you put on a trade, the set up was perfect, but the trade went against you.
Why? Who knows. But it doesn’t matter, as long as you are following your system and overall your systems works. There are always going to be times where it doesn’t move as expected. Manage it. Which brings me to number 5.
5. Course management. Golfers, especially the pros, talk about course management. Knowing when to hit the driver and when to keep it in the bag. When to go for the flag and when to play it safe.
It depends on the hole and the conditions. And that’s the thing about golf, every time you play, the conditions are never exactly the same.
In trading I think course management correlates to money management and trade management. Knowing how much of your account to risk on the trade. Knowing when the odds are more in your favor or not.
Knowing when to take partial profits and when to let it run. And just like in golf, the conditions are never the same. So take a cue from golf, develop good money and trade management.
In today’s video I review the top five performing stocks year-to-date in the S&P 500 index. These are Vertex Pharmaceuticals (VRTX), Activision Blizzard (ATVI), Wynn Resorts (WYNN), CSX Corp. (CSX) and Nvidia (NVDA).
To all the fathers out there…Happy Father’s Day!!!