In sports and trading, we often think that separating big athletes and traders from others is the ability to make big win shots and big home run trades. That is not true.
A very interesting shot-by-shot analysis of the Basel 2010 tennis championship reveals a lot about how elite tennis is played and elite trading can also be mastered.
Background: The tennis match was the final of Roger Federer and Novak Djokovic. Djokovic won the tournament last year and retired Federer from the US Open in the semi-final in September. Despite Djokovic's psychological advantage, Federer won the game, winning the 65th ATP title and breaking Pete Sampras's record for most major titles.
You may think that Federer should make many spectacular victory shots and fire after the winner has overwhelmed his highly skilled opponents. It's not. All shots were evaluated and match analysis revealed some amazing statistics [see the match analysis link below].
Important findings: Two things come out of this unique analysis. First, there were many unforced errors throughout this match. An unforced error means that points were lost due to insufficient ball hitting that the player was supposed to be able to return to. In this important game, 40% of the points played ended due to a forced error. The takeaway message is that even the best players in the world make many mistakes!
The second important finding in this analysis is that only 5% of all shots created were clean and earned shots that were not touched by the opponent. There were 709 shots during the match, with only 36 clean service aces, returns, overhead smashes, ground stalks, or volleys. These uncontrollable winners accounted for about 20% of the points earned. In other words, 4 out of 5 points were won in longer meetings, unforced errors, and solid court play. There were few spectacular shots.
Meaning of the transaction: For active traders, the takeaway message is clear. Even an excellent trader-even an elite performer-is not based on huge home run transactions. It is to get rid of small daily victories. Occasionally we are lucky and we can win big, but this rarely happens. Just a small percentage of the time, like a low percentage of spectacular shots made in this tennis game. Being a competent trader is not based on getting a big win. Consistently winning small wins.
For other takeaway messages, the error is OK. We all want to be error-free, but it is impossible to be human. The important thing is to know when you have made an error and quickly reduce the loss no matter what. Then don't try to get everything back with big winning trades. That is another unforced error. Instead, focus on doing the next small win trade, and then the next and next trade ...
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