There are a lot of similarities between sports and trading the financial markets. Yes, I am aware that one is a physical grind, while the other, you essentially are sitting in a chair and clicking on a mouse button all day long. But the mental aspects are very similar, so what I'd like to do in the coming days is highlight those similarities. In doing so, I will take different athletes, concepts, etc. and show you how they apply to trading and how they can help you to be better at controlling the psychological aspects of the trade. 

Going Out On Top!

No doubt Brett Favre was a great quarterback - one of the greatest, and his longevity and streak of 297 consecutive starts is unbelievable. However, the man did not know when to leave the game. Multiple timesBrett Favre winner he could have gone out on top as a 3-time MVP of the NFL and Super Bowl Winner. Arguments could be made he should have retired with the Packers, but no one will argue against me when he DEFINITELY should have retired as a Viking player last year. Statistically speaking, he had his greatest season of his career last year, and came within one game of the Super Bowl. As the leagues only grandpa, and body, no doubt, breaking down, he should have rode off into the sunset as the victor - the man who went out on top and made his last year his very best - A Sunday Night Family Movie in the makings.

But against his better judgement (because he was content to stay in Mississippi as an NFL retiree), he allowed for a few guys to talk him out of retirement and back on to the playing field one more season. 

Instead of putting the Vikings over the top and into the Super Bowl and having an even better year than before, he had statistically the worst year of his career, threw an awful amount of interceptions, the Vikings failed to make the playoffs, and his body got battered and bruised like never before, including hand, shoulder, ankle injuries - which also comes on top of a concussion. Not to mention his streak of consecutive games played was snapped. Along with a nasty scandal that included involvements with a woman sideline reporter and team massage therapists - that had he stayed on the sideline, may never have made it into the media's lime light. 

Without a doubt, one more season cost Favre a lot!

So How Does This Relate To Trading?

How often have you stayed in a trade longer than you should have? Quite a bit I imagine. There are times where you are sitting on some handsome gains like CROX (2007) in the $60's or BAC in the $50's (2008), and JDSU at over
Brett Favre Turmoil$1,100 a share (1999). Instead of prudently taking profits when you were on top where you knew that price was overextended, and where risk was at its highest and reward at its lowest, you instead pull a Brett Favre and say "ONE MORE SEASON!" And that is where it all came apart. One of the biggest enemies of a trader is staying in a trade for too long - everything is going for you, and you can go out on top, and instead of taking a portion or all of your position off the table you end up losing it all. So next time you are battling the greed factor, you need to ask yourself, "Am I pulling a Fav-re?" If the answer is yes, you might want to take the trade off the table. 

This can best be seen, when you have a profit and you allow it to turn into a loser, or when you fail to follow your stop-loss that is set, and instead you put it further down, to give it that once last bit of opportunity in hopes that it comes around and fulfills all your hopes and dreams. 

It's so tempting even when the odds are stacked against you, when risk is high and reward is low, to stick it out another day or another week, in fear that you are going to miss another big move, that may cost you so much in profits. But remember, when it is late in the fourth quarter, and you have the lead...and the crowd is chanting your name, that is the time when you want to run the time off the clock and head to the locker room - or in Brett's case...Retirement. 

 

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