Strategic trading breaks... the performance boost "borrowed" from pro sports

Trading breaks that tie into market psychology to increase edge

I have a view on trading breaks analogous to AFL (Australian Rules football - 18 players a side and a ball similar in shape to that used in American football).

The “tall forward” is a spearhead of every team’s scoring arsenal. Their height provides an advantage in the aerial marking competition which if successfully marked, gives the forward an uncontested kick for goal. It’s a coveted position within the league, often held by “stars” of the code.

Interestingly, as soon as one of these prodigious players score, they are immediately taken off the field for player rotation (rest), continually bemusing commentators.

“Why take him off just as his confidence is up?” or “he is in the zone” or “he is having a significant impact of the game”.

The reasons are clear:
When a set play works out resulting in a goal, the outcome is known to the opposition. The team as a whole had stealth advantage before the goal so odds wise, in the absolute near term, the odds are now reduced of the same player kicking another goal.
The team as a whole has been focused for a period leading up to the goal, perhaps having numerous “scratch” attempts just prior. It stands to reason playmakers require a break to recuperate so they can continue to perform at a high standard.

I strongly believe trading sometimes requires long and continuous stints in front of the screens. It’s the nature of a competitive endeavour; sometimes the reward only comes after many others have given up on their view (covered or reversed), reacted through frustration, or it just simply takes time before all of the ducks finally line up. I’ll come back to this point…

However, whenever I take a directional trade and it reaches the point of “the outcome being known”, that is THE BEST time to take a break for the same reasons mentioned above. The best moves commence when the majority of participants are simply not prepared/haven’t considered etc the outcome which leads to them having to cover. Once the outcome is known, the market moves into a far more complex phase as the view of whether to be long or short is more evenly split.

“Before the outcome is known” are the lowest risk trades because they move quickly in your favour so the time spent in the market with accepted initial risk is the smallest amount of time.

“Before the outcome is known” are the best trades to add size during the move because they don’t pull back to nearly the same degree as trades the market is partly prepared for (I’m referring specifically to intra-day, I can’t speak for other time frames).

Therefore, a component of “trading development” I am very big on is being able to distinguish between “before the outcome is known” and “the outcome is known” because this enables you to optimize when you trade and when you don’t.

The “outcome is known, so it’s break time” is a habit now, and it removed a former bad habit of continuing to trade and give back a lot of the previous gains because I simply didn’t have the awareness and game theory understanding.

Back to the “long stint” at the screens… it takes a crap-load of stamina to be effective at the screens for hours on end, and one has to be conditioned, through repetition, to attain that level. I use the simple analogy of pressing weights at the gym, where the stamina and strength are built up over time. Couple this with the “before the outcome is known v outcome is known” concept - in my experience the message gets through to traders I work with (predominantly male 48-58).