Nick McDonald

Getting started in financial markets

Nick McDonald: More trading lessons from the World Cup

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Germany's Mario Goetze celebrates after scoring the winning goal during the World Cup final soccer match between Germany and Argentina in Rio de Janeiro. Photo / AP
Germany's Mario Goetze celebrates after scoring the winning goal during the World Cup final soccer match between Germany and Argentina in Rio de Janeiro. Photo / AP

The FIFA World Cup provides many lessons for anyone looking to perform at the highest level and that includes those looking to succeed in the challenging world of trading financial markets.

Tips on applying World Cup lessons to trading start here with some final lessons for peak performance continuing below.

5 - We need feedback to improve
In most endeavours, we must lose in order to learn as winning alone only teaches us part of the required lesson. We need unbiased feedback on why we lost and where we can do better. A football team is supported by another team of coaches, nutritionists, physiotherapists and such, the coaches in particular charged with giving players unbiased feedback on their game and areas in which they can improve. Often it is not obvious to the player that they were constantly playing out of position or how they could have avoided getting on the bad side of the referee.

Unbiased feedback is very difficult for a trader to achieve without a trusted mentor and even harder without accurate records as memory is almost always biased - "all of those trades were great trades, otherwise I would not have taken them". A football team has the recording of the game. Traders need accurate records of the exact reasoning for their trades, as recorded at the time of placing the trade. Only then can the trader and their 'coach' accurately review performance and look for areas of improvement.

6 - Sacrifice precedes success
"I always thought I wanted to play professionally, and I always knew that to do that I'd have to make a lot of sacrifices. I made sacrifices by leaving Argentina, leaving my family to start a new life. I changed my friends, my people. Everything. But everything I did, I did for football, to achieve my dream" - Lionel Messi

When I first left my job in 2004 to trade full time, I made a lot of sacrifices; small and large but even what seem small ones to me can be major barriers for many people to getting started.

A few examples - I ditched the TV at home, I no longer had time for anything that was not advancing my career. My social life took a back seat. I was much more careful with my money and much more focused on being in the best mindset and condition to trade each day. Hung over or tired from a night out was no longer a valid option; I worked harder than I did when I had a job. Many people think working for themselves should be easier but in fact it only gets easier after first being much harder. I sacrificed income and the security of a job and, having just bought my first home in London with my first mortgage this was, in hindsight, a very risky time to make that sacrifice. I also changed my friends, particularly those who told me that I was going to fail as a trader and that I should keep my day job. I needed positive influence and had no room for negative.

These are just examples of the more obvious sacrifices that I made and can be viewed as small or large depending on your perspective. The point is, that whatever the endeavour, to achieve great success there will be sacrifice.

7 - Risk management is overlooked by amateurs, yet is everything to professionals
Consider a football player who has not played for six weeks because of a serious injury. How do they decide when to come back? This risk is carefully balanced by coaches, doctors and the player. Come back too soon and risk aggravating the injury and not playing for a lot longer. Don't come back when ready and the team risks losing by missing one of their important players.

For a football player the risk is firstly to their physical ability to play and secondly in their form. Do they need more time in training to be match ready? Should they start the game or come off the bench? For a trader, this is the equivalent of having capital left to trade with while also being in the peak mind set to trade well. Traders have down time too, sometimes for holiday, other times for sickness. At times we take 'poor performance leave' which for a trader is the equivalent of an injury for a footballer but the damage is mental not physical... the coaches still need to decide when the player is ready again, both physically and mentally.

The risk to traders of getting this wrong is twofold: more monetary losses and more mental fatigue/frustration/distraction. The best traders manage coming back from time off, just as carefully as a professional footballer. They also protect their trading capital like their life depends on it. Often after all, it does!

8 - There is no substitute for hard work
"I worked hard all my life for this. Those who say I don't deserve anything, that it all came easy, can kiss my a*#" - Maradona

Need I say more? Maradona has said it all for me on this final point.

Nick McDonald is a New Zealander teaching everyday people how to trade the worlds markets via his company Trade With Precision.

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