Trading Lessons from the World Cup - Winners and Losers

Why Traders Need to Learn from the World Cup to Avoid Going Broke?

Whether you are football fan or not, fact is that the world cup 2014, which concluded last month (July), dominated news headlines in the period it happened. The showpiece event might be over but the hype is still there; the pain for the losers as well as the joy and ecstasy of the winners. From tactics and strategies to preparation and psychology, we as traders can draw a lot of lessons from the most important sporting event in the world.


Lesson 1 - Winners Germany

Germany, the eventual winners of the tournament, built their base camp retreat all by themselves. They invested heavily in the resort that was situated in places that have similar weather conditions to where their matches would be held during the tournament. Every detail, in and out of the resort, was well planned and crafted. The location was also superb; it had a beach view and it was only 45 minutes away to the airport where the players could then aboard their private jets to the stadiums where their matches were scheduled. This helped the team to relax, relieve tension and minimize jet lag. The players would arrive to their matches very fresh and much focused- you certainly would never like to be the opposing team. As traders, this is how we should prepare for every trade. In the forex market, where the success rate is below 10%, you have to be at your optimum best to succeed. Every trade and every analysis should be carefully thought out. The forex market is no casino, so any trade is no game. There is no absolutely no room for complacency. If you put in hobby-like efforts, you will get hobby results. We should adequately prepare for trade because any laxity will reflect on your account balance. What the Germans showed is that, skills and technique aside, sometimes being relaxed, fresh and energized can take you far.



Lesson 2 - Surprising Netherlands

Compare the Germans preparations to that of Netherlands. The Dutch reserved their hotel up to the semi final dates. Probably, they did not envision themselves even going that far. When they bowed out of the competitions as third best, they had, by all standards, overachieved. We can, however, learn from the overachieving Dutch team. When the team left their home country, there was no much expectation on them. Majority of their team was inexperienced and they literally in the ‘group of death’. However, their coach devised a system that would take advantage of their strengths. They would play with 5 defenders (not the standard 4) and would look to counter attack their opponents as they possessed a lethal attack duo in Van Persie and Arjen Robben. No surprise that they embarrassed Spain, defending world champions, by a 5-1 scoring margin in their first group match. As forex traders, we should also play to the strength of our systems. You should know when your system works best. Be patient and comfortable waiting for the market conditions to play out to your system and strategy requirement, then, just like a sniper, shoot. You should know the weaknesses of your system and do not give the market the chance to exploit them. If you play to your strengths, you will definitely ‘overachieve’, well, just like the Dutch.



Lesson 3 - Under Performing Brazil

The final lesson we can draw comes from Brazil, the land of football. Brazil came to this tournament as title favorites. Of course, they had to be: home advantage, winners of confederations cup, an 18-game unbeaten run, exiting and experienced squad, a world cup winning coach and the most impressive young star in Neymar. They started the tournament well and reached the semi finals where they were exposed and humiliated by the all conquering Germans. They had lost Neymar, their key player, to injury for that clash and went on to lose 7-1. A country with the most splendid footballing history had been humiliated at their own turf. This is what can happen when you have a little lapse in concentration and you are facing a ruthless opponent such as Germany. Traders will know that an opponent cannot come any more ruthless than the market. A simple mistake such as a lack of a stop loss order is enough to wipe out you entire capital, regardless of your previous success, ‘history’ or even ‘discipline’. Your previous success has no bearing to your future.



Bottom Line - Football or Forex, Lots to Learn!

The world cup proved that best teams are the ones that undergo intense customized preparations. You have to prepare very well before any trade or trading session. Always know the strengths and weaknesses of your trading system and strategy. Be patient and wait till the market gives you the opportunity to play by you strength and avoid entering a trade when the market conditions can expose the weaknesses of your strategy. Lastly, never enter any trade out of over confidence or emotions. Beware of the fact that your last trade, or a couple of trades, has no bearing whatsoever to the outcome of your next trade. This means that you have to maintain optimum levels of discipline, commitment and focus at all times. Happy trading!


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