The losers game

Ever felt like somebody is deliberately trying to coax you into a mistake when you trade?

When I first started trading

When I first started trading I wasn’t sure why the market did what it did, but my response to this was was quite simple and something I have always done in any market I have participated in. I started keeping detailed records of everything I did.

That sounds incredibly dull and uninteresting, but it’s actually the core of any successful strategy. What I was looking to do, was to strike out any obvious errors and look for failure points. Profit or loss is such a fine line, by striking out errors  you can  start to turn things in your favour.

By looking for failure points and looking at your loss rate,  you can learn what task  you have ahead in order to turn profitable. When things didn’t work out as planned, I simply looked at my records. I was looking for some comparison, explanation or correlation to any previous results that would explain why something didn’t work. I could learn from that and, over time, striking out those errors or adapting my behaviour allowed me to morph into a core strategy.

The losers game

I took inspiration from a game of Tennis. When I was learning to play, my friend told me my aim wasn’t to win the game but to not lose. It was a bit of a ‘say what’ moment. He pointed me to work written by Charles Ellis.

The theory was that professional athletes play a “Winner’s Game” and amateur athletes play a “Loser’s Game.”. In Golf, the winner defeats his opponent by superior play. However, the winner of an amateur golf tournament is often the player who makes the fewest mistakes. Amateur golf is a Loser’s Game, the loser usually defeats himself by poor play. Ellis cited a study revealing that in professional tennis, 80% of points are won but in amateur tennis, 80% of points are lost.

So my base for participation is to not find a winning strategy first, it’s to avoid the most obvious cock-ups and everybody has plenty of those when you start!

One fits all, fits nothing

This is how I figured out a one fits all strategy just isn’t effective if you want to get really successful. Some strategies work well in some markets and others perform better elsewhere. You should also be aware that some people, fit some strategies better than others. Learning about yourself is all part of the process.

Learning to win is one thing, but losing and learning why you lose is critical in the scheme of things. Over time, I have got better and better at identifying what I should do, when and why. This also has the dual impact of reducing  the frequency and scale of your losses allowing you to put more and more money through as you feel more comfortable with the downside risk you are taking.

My first bet on the exchanges was £5, my focus changed from not just try to do the right thing but trying to do it with as much money as possible. You too can achieve the same thing with some hard work and by looking long and hard, not at your wins but particularly your losses.

It’s a losers game.

Tags: ellis, losing, the losers game, winning

Category: Trading strategies