It seems that everyone is still buzzing about The Fight of the Century so I’ve decided to come up with a play-by-play analysis of the lessons forex traders can learn from the bout. Just a disclaimer… I’m no boxing expert but I’ve knocked out Big Pippin on Wii Sports Boxing so I think that counts!
1. Preparation is key!
As with most endeavors, preparation is half the battle. While most of the boxing action has been summed up in twelve rounds of two minutes each, the fighters have been getting ready to rumble from the very day the match has been confirmed. That’s months’ worth of getting in shape, endurance training, researching on your opponent’s strategies, watching tapes, sparring, identifying potential scenarios, and making the necessary psychological preparations for the actual fight.
In forex trading, the battle begins even before you open up your trading software. To be able to make the proper decisions while trading, you have to review price action and make sure you’re updated on what’s been driving the markets. In addition, you have to be able to anticipate possible outcomes so that you’re prepared to make any adjustments.
2. Flexibility is a must.
When Plan A isn’t working to your advantage, have your Plan B ready and adjust quickly. There will be times when the most popular strategy might not be the most profitable one so you have to be ready to explore a different approach.
If the market is making strong trends without any retracements, consider taking breakout opportunities rather than waiting for pullbacks. If you like following long-term trends but the low volatility environment is keeping forex pairs in ranges, be open to taking quick day trades off inflection points. If you want to keep throwing punches but your opponent just wants to hug it out, better start getting creative about landing those shots.
3. Taking more trades doesn’t guarantee more wins.
While many were disappointed with Mayweather’s lack of aggressiveness in the ring, sometimes it’s all about the QUALITY of the shots you take and not just the QUANTITY. Sure, the market may make a lot of moves and present several trade opportunities, but you don’t necessarily have to catch all of those especially when the reward-to-risk ratio isn’t too favorable.
I’ve always said that deciding against taking a setup can be a trading decision in itself. There are some instances when shielding your face or running around the ring can be a reasonable risk management decision, as you also need to figure out whether the odds are in your favor or not. As in basketball, the cliché “Defense wins championships” can also apply.
4. You gotta take risks from time to time.
Then again, there’s also a fine line between picking the high-probability shots and playing it too safe. If your fear of losing winds up preventing you from taking any risks, then you should probably start rethinking if a career in forex trading (or boxing) is for you. After all, any trader can maintain a zero-loss record if he refrains from being aggressive or taking any trades at all.
There will always be some degree of uncertainty in forex trading since a few surprises are bound to happen every now and then. But as hockey player Wayne Gretzy said, you miss 100% of the shots you don’t take. You can’t keep hoping for a big knockout win if you’re always afraid to take risks.
5. Learn from your losses and move on.
Moving on from a loss is definitely easier said than done but, as cheesy as it sounds, dealing with losses can make one stronger. As Manny Pacquiao managed to stay gracious in defeat, winning the hearts of his countrymen and even some Hollywood celebrities, forex traders should also be able to accept their losses and learn from them. Similarly, if you’re disappointed about paying to watch a fight and getting a fun run instead, there’s no need to keep sour-graping and wishing for a different outcome.
Instead of treating each loss as a personal failure, focus your efforts in examining what happened and what you did wrong. From there, you can be able to identify areas of improvement and be able to make better forex trading decisions later on.
Got any forex-related takeaways from the Mayweather-Pacquiao bout? Share ’em in our comments section below!