Oct 4, 2007

How My Trading Improved Thinking Like a Martial Arts Fighter

Bang! Bang! Oof! Ouch!

These aren’t the sounds from a day in the market, it’s the sounds of Mixed Martial Arts (MMA) which is quickly becoming one of the fastest growing sports in the world. I’m a big fan of not only the incredible action in the ring, but the mental chess that’s played in the fighters’ heads. When opponents face one another in the ring, they juggle 3 complete games to be competitive. A fighter must know how to:

  • Strike (i.e., punching-boxing and kicking)
  • Develop a great ground game (i.e., wrestling and submissions)
  • Maintain excellent conditioning outside the ring

Persons that compete at the top in the Ultimate Fighting Championship (UFC) are no one trick ponies. Leave a comment about your preferences for this type of sport compared to boxing below.

Connecting with the Punches

Trading requires a similar multifaceted arsenal to succeed.

Trade in Bull Markets? Trade in Bear markets? Trade when there’s no wind in either sail? You will simply not be in the game long without a plan for when to trade (i.e., Strike), proper Risk Management (i.e., the ground game), and continuous education and training (i.e., conditioning). Just like a dedicated mixed martial artist trains hard to prepare for a fight, you have to train yourself to win in the market. Learn the discipline, use the right tools and you can improve – there is no magic, only continuous learning and adapting.

“Watch these green lights or watch these red lights”

So often I see traders either unwilling or unable to learn the 3 needed skills to be successful. If I am up late at night from time to time I catch the infomercial where some vendor is promising the next magic system. “Watch these green lights or watch these red lights”, “it is so easy I made money in my sleep”.

These companies continue to make a ton of money preying on people’s desire to have someone figure it out for them. The reason these systems don’t work is because the market is not easy. If people keep telling you that it is easy they are for certain trying to sell you something. Ask yourself why money managers are making billions. I can guarantee you with 100% certainty that the reason is because making money in the market is NOT EASY. Would you step into the ring with an MMA fighter right before your weekend afternoon nap or after the ballgame? Unlikely.

MMA is just a physical metaphor of the discipline a trader needs in order to see results and correctly diagnose actions that need correction. Commit to improvements in these areas, catch a little MMA in action, and you’ll be the one dancing in the ring when the bell sounds off.