Football and Trading—There’s a Lesson In Everything (Part 2)

The coaches of Super Bowl 50 apply experience and strategies towards making their players highly accomplished, wanting them to win the championship. Check out some of the key points.

Last week we reviewed several articles from the Wall Street Journal. These articles focus on the path to the Super Bowl, and the strategies that coaches have used to achieve greatness. For a review, click here.

One of the key points we made was that you could apply many of the strategies used by coaches to your trading. We analyzed the game itself, and we studied the actions of a few key players.

This time around, we’ll focus on Kevin Clark’s post, “A Win for Sticking to the Game Plan,” which appeared in Monday’s Wall Street Journal.

Clark details Malcolm Butler’s failed defensive move and his ultimate redemption via a late-game interception. Clark points out, however, that most post-game analysts consider coach Belichick’s game management the deciding factor. Not only did Belichick come up with the plays, he managed the action from the sidelines.

Clark’s closing statement stood out to me:

“Simply put, the Patriot’s decided that the best way to win a game against the Seahawks was to do exactly what got the Denver Broncos blown out [Last year’s Super Bowl]. It worked. You know why? Because it’s all about the quarterback.”

From this, we can derive two keys for success:

Have a well-defined game plan.

Have players committed to executing that game plan.

What’s more, we can apply these lessons to trading. Remember: these concepts aren’t new, and you’ll get out of them what you put in.

For a unique perspective on the role of a coach and the impact he or she has on a player, I encourage you to read Christopher Caldwell’s article, “The Management Genius of Bill Belichick.” Caldwell—who believes that Belichick is one of the great coaches of all time—writes that the greatest NFL coaches have a lot in common. Specifically, great coaches create and optimize systems to handle personnel and power those systems with Machiavellian calculation. Caldwell describes Belichick as a ‘thrillingly counterintuitive decision maker.’

According to Caldwell, Belichick has studied history’s greatest battles, and he drills into his players the difference between a winning strategy and a losing strategy. In other words, mental exercises are paramount. Naturally, he also requires his players to go through physical drills. The latter requires little more than muscle memory and physical prowess.

Below, I summarize the key takeaways.

(1) Winning is about thinking, drawing on experience and planning. It’s not always about spectacular plays or star players. These elements bring in the crowds; they don’t consistently win games on their own. Winning is capitalizing on your edge. Mental throughput is required to position that edge at the right place at the right time.

Here are three key resources to help you design and implement your plan:

Brett Steenbarger’s post on TraderFeed entitled, “Three Top Reasons why Traders Fail to Trade Their Plans.”

Brett also penned another post that goes into even more detail on this. This post is entitled, “Why Trader’s Plan Trades but don’t Trade Their Plans.”

Finally, Brett’s book, The Daily Trading Coach, is available on Amazon. Note chapter 8, ‘Coaching Your Trading Business’, and Lessons 72, 74, and 75 which focus on planning, structure, tracking, and course-correcting.

These resources underscore the importance of emotional awareness, building a realistic plan and minimizing distractions. We recommend you give them a look.

In our view, the most important takeaway is how complex a well-thought plan is. Still, the benefits you glean from optimizing your processes are staggering. Developing such a plan requires a fair investment of time and energy, but is well worth it.

(2) It’s about emotional management. A key aspect of Patriot culture is mental awareness. Players must adapt to the ever-changing environment and continuously learn. The players are discouraged from focusing on the past, with its siren’s call of abandoned—and probably ineffective—strategies.

As mentioned, in the last few minutes of Super Bowl XLIX, Malcolm Butler connected to a long-shot interception. At that moment, an opportunity opened for the Seahawks: they could cause a safety from the one-yard line to narrow the score gap, and then they could have secured a win with a 3-point free kick.

Instead, emotion ruled the play. Michael Bennett jumped off sides, which cost the Seahawks a five-yard penalty. Then, with just 18 seconds left in the game, Bruce Irvin—a linebacker for the Seahawks—threw a punch at rival player Rob Gronkowksi. Bennett was ejected from the game, and the Seahawks forfeited a further 15 yards.

The game was lost in those 48 seconds.

To read up on how emotion affects traders, read Brett’s post, “Trading and our Emotional Temperament.” The subject of the post is temperament, and how it affects our actions. You may also find it beneficial to read this post with the emotional behaviors of Bennett and Irvin’s reactions in mind.

Here is a brief mental prescription: think about how you feel right after a win, and how that mental state propels you onward. Next, think about how you feel after a loss. In both circumstances, do your lingering emotions affect the rest of your day, week or month? Finally, be honest with yourself: how well do you manage your emotional state?

(3) It’s about vision, goals and belief. At the end of the game, Butler said:

“I just knew I was going to make a big play.”

To read more about the power of visualization and belief, look at Brett’s post entitled, “Visualization: Becoming the Director of the Movies in Your Head.”

Another post entitled, “How Goal Setting Helps Performance,” contains valuable information such as this quote:

“Key to the achievement of goals, according to the researchers, is self-efficacy [the power of one’s beliefs to make things happen]. People are much more likely to buy into and pursue goals if they believe themselves to be competent to reach those goals.”

How might these mental processes give you an edge in your own trading?

Until next time . . .