What Financial Traders Can Learn From the Game of Golf
Forex Blog Articles
What Golf and Trading Have in Common
This post aims to describe parallels between the game of golf and financial trading. I hope it will give you some insights to reflect on and key takeaways to help improve your trading performance.
So, it’s happened… I’ve taken up golf. Yes, being middle-aged, I realize it is a cliché. But, like hundreds of others forced into isolation during the COVID-19 pandemic, golf was for some time one of the only sports that could be played outdoors.
I paid for a few lessons with a golf pro, and some of what he said to me has really resonated with my trading. I found there to be many parallels which I thought it would be insightful to explore and share.
This article is an educational guest post, it was written by Ben from Ben the Trader blog.
Psychology plays a major factor in golf and trading
“It’s so frustrating…” Pretty much every golfer I’ve spoken to (both beginners and pros) has said this exact thing to me.
The reality is that is it as much a mental game as a technical one. Sure, having great psychology won’t make you a great golfer. However, the opposite is also true. You can have an amazing technique and still not be able to execute effectively due to psychological inhibitors.
The same goes equally for trading.
You make have a great system on paper. You may have backtested it and forward tested it and demonstrated a positive return on investment. However, when you come to actually trade it for real you don’t get the same results. Like in golf, psychology can drastically affect your execution and performance.
This could be for a number of reasons… Perhaps you didn’t follow your system. Perhaps you over-traded whilst trying to make up losses. Perhaps you didn’t follow your own risk management rules. Whatever the reason, it is often your psychology that messes you up.
So, what can we learn from golf to help us improve?
You can’t stay on the driving range forever
A pretty common thing you hear is “I’m hitting great shots on the driving range, but can’t seem to take it onto the course”.
Psychologically, it is more difficult on the course because of the shots “matter”. Plus, you have the added pressure of other people watching you. Technique-wise it can also be a challenge too as you’ll experience different situations. Like where you’re hitting out of the rough, from a bunker or on a slope. These are all things you don’t typically practice at the driving range.
Trading is very similar in many ways. You can demo trade for a long time and have great results but really struggle to put it into practice when you are trading real money. As a result, you need to find situations to practice whilst mimicking those real situations. Some find trading with a small (but meaningful) account can help to do this. Others may trade but apply slightly tighter risk management than normal. Regardless, it about finding ways to make the situation as real as possible. And not being afraid to take the plunge eventually.
Focus on the process, create “muscle memory”
They say it takes 10,000 hours of practice to master something. This applies to both golf and trading. You’ll often hear golfers talk about their pre-shot routine and setup. If you watch many pros, they do this in a standardized way every single time. From how they stand, take their practice swing, focus, relax, etc.
The point of doing this is both psychical and mental. It helps you make sure you execute consistently, but it also helps control your psychology as you take “comfort” from following your tried routine.
The exact same approach applies to trading. If you have a tried and tested system and approach, then you need to apply it in an almost robot-like fashion. You need to get to the stage where every element becomes “habit”. So that taking an entry becomes second nature, as does exiting a trade and thus limiting the opportunity for your emotions to come into play
Learn to accept your bad shots
Inevitably in golf, you will hit some bad shots. If you’re me then this will happen more often than not! However, you need to learn to accept them as part of the game and not allow them to haunt you.
The same applies equally to trading. Losses in trading are not a bad thing, they are a fact. I don’t know a single trader or system that can operate with a 100% win rate. You have to learn to accept them and move on.
My instructor said to me once “I don’t mind that you hit a bad shot then, as you followed the right process to take it.” As long as you followed your method/system (see above) then you can be confident that over time you will recover your losses.
The key point though is to control the impact these losses have on your overall game, which leads nicely to my next point…
Getting your “course management” right is critical
Course management is a term used in golf to describe how you go about managing your specific game situation. For example, do you risk the big shot over the bunker/stream? Or do you play it safe, go for the easier shot first to set up an easy pitch onto the green?
This is very much akin to risk management in trading which is possibly the single most important discipline. You need to be 100% clear from the outset what your approach to risk management is.
For example, what is your desired risk to reward ratio how large a position will you take? This risk management approach, like in golf, needs to suit the psychology of you as an individual. For example, does know there is a hazard to hit past typically make you hit a grass cutter? If so, then it may be safer to go for the approach shot. In trading it’s similar, does your personally suit a system with a high win rate (but smaller wins) or a low win rate (with a larger win), as an example?
Treat every shot as a learning opportunity
This is a great piece of advice but rarely executed well.
When I started golf lessons, if I hit a grass cutter, the instructor would ask me “why did that happen”. My stock answer was usually something like “because I’m terrible”. But the truth goes further than that. Once you have a standard process, you can much more easily start to problem solve as to the reason for your bad shots. Where did you hit the ball, how was your grip, did you do a practice swing, etc?
The same applies to trading and is why so many people advocate the use of a trading journal. However, trust me there are loads of traders out there who don’t systematically journal their trades, even though they know they should. This is a real shame as you automatically lose the opportunity to learn.
A structured approach to reviewing trades is critical as a trader. When things go wrong you need to figure out a way and identify the root cause. If you followed your system (muscle memory) and you lost then that could just be something you have to accept. However, if you didn’t follow your system why was that? Problem-solving the reasons why so we can learn from them is as important in golf as in trading.
To conclude – Your only competitor is yourself
The great thing I love about golf is that, for the most part, you are playing against yourself. That is unless you are a professional!
This is true in trading too.
Though you will often want to blame “the market” the truth is that the biggest thing getting in the way is normally yourself.
I’d encourage you to look across other activities you undertake outside of trading and draw parallels. I think you’ll be surprised at some of the insights you can draw out to improve your trading performance.
About the author
My name is Ben and I’m from the United Kingdom. I have been trading on and off for 15 years, though I’d say only seriously over the last 5.
I’ve recently started my own blog where I try to “demystify” financial trading for the masses. When I started, I found there was a lot of content out there on trading which can be a little overwhelming. It’s often difficult to pick the good from the bad. In my posts I try my best to break things down simply for people.
I’m keen to connect with other traders and share experiences. You easily find me on Twitter – handle @ben_the_trader – feel free to get in touch!
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