Home › Market News › What Can Basketball Teach Us About Volatility Swings?
If you are a fan of NBA basketball in the United States, you have likely enjoyed the first two rounds of the 2022 playoffs. Last night (Sunday, May 15), the second-round series between the Phoenix Suns and Dallas Mavericks ended with a Game 7 victory for the Mavericks, who will now move on to the Conference Finals. While I enjoyed watching both teams and had no particular favorite in the process, I made some observations from the series that prompted trading reflections.
As you may know, the seven-game series between these two teams resulted in the formation of a rivalry that involved some feuding. After Phoenix won game five, they had a command of the series, leading three games to two.
At that point, the Dallas Mavericks star Luka Dončić was quoted to say:
“Everyone acting tough when they [are] up!”
In Dončić’s view, the Suns acted a bit cocky when they took the lead in the series. What resulted from this was Dallas coming back to win the final two games of the series, including an absolutely embarrassing blowout to finish game 7.
I thought about this resurgence in the motivation of the Mavericks after they felt disrespected, and from this, I began to consider lessons for trading. These principles, which I will discuss in this article, are very pertinent, whether during the volatility of recent trading within the financial markets or during the wild swings of the NBA playoffs.
These first two rules are absolutely critical if you have benefited from recent volatility swings.
Dončić was correct insomuch that everyone seems more confident following success.
Confidence is a double-edged sword. Like athletes, every trader needs a good and healthy dose of confidence; otherwise, we will risk ruin. However, overconfidence occurs when a trader begins to assume that what they touch will turn to victory. When this happens, they begin to flex their rules a bit too much, and they tend to lose a certain edge of their strict criteria for trade entry.
This second idea aligns with the first. We should strive to be content in many facets of life. Trading, however, is an area where we must maintain a hunger for greatness. Complacency in this context will often lead to missed opportunities. Rather than continuing to grow during success, you settle for recent victories, and your ultimate profit potential will be hindered. Perhaps more dangerously, you may grow stale or bored.
The following two pieces of advice apply if you have found yourself down during the recent series of volatility.
The Dallas Mavericks had the inferior and less experienced team. Furthermore, they didn’t have a home-court advantage. Yet, when their backs were against the wall, they fought to come from behind and win!
The same scenario applies to the other basketball winner on Sunday (May 15, 2022), the Boston Celtics. They had to overcome a 3-2 deficit to the defending champion Milwaukee Bucks, and they maintained their drive for greatness, pulling out a come from behind series victory.
If you are down right now, I urge you not to give up. Volatility will likely stick around longer with global economics and geopolitics. You have a chance to make an impressive comeback!
To do this, you must maintain discipline, stick to your trading plan, play defense by managing risk, and take advantage of open shots. Unfortunately, I can’t tell you how to adjust your plan because each of you is different. However, all it may require are some minor tweaks to get back in the game for some of you.
Both the Mavericks and Celtics were lifted in their comebacks by their star players, Luka Dončić and Jayson Tatum. The playoffs are a time when stars are supposed to be given the ball to shine.
If you are suffering during recent volatility, I encourage you to get behind your star players. What I mean by this is to lean on what you do best. During volatile periods, if you have suffered, rather than trying to trade everything at any time, stick to the market or markets you are proven to trade the absolute best. Also, maintain the time of day for trading when you are known to perform your best. Lean on what you do well. Meanwhile, eliminate the noise and let your star players win the game for you!
I hope that those of you who have been successful traders in recent weeks and months will maintain and even improve your performance; meanwhile, those who have been struggling that you might find your way into much success.
Remember, no matter who we are, let’s not take our eyes off the ball but keep our objectives and goals visible and pursue greatness.
Until next time, trade well!
