7 Ways To Bring The Fight To The Markets

This past Saturday I found myself in a very unusual place; attending a MMA Championship fight. Unusual for me because a younger, more shot-nosed, pseudo-intellectually judgmental version of myself thought that the invention of cage fighting was a harbinger of the decay of the civilized world. Neanderthals participating in the modern version of gladiator fights, thrilling over-roided audiences, drunk on branded souvenir cups full of Miller Lite, was the vision I had in my mind of these affairs.  To think I would have ever paused to watch a match on TV, let alone attend one in person, was ludicrous. Yet there I was, with floor seats, not more than twenty feet away from the action, fascinated by what I saw, and ready to fully admit that my preconceived notions were not only pompous and arrogant, but 100% wrong.

The crowd was one of the most well-behaved I have ever seen, certainly a cut above the fans of the average rock band, and I spoke to many intelligent and insightful people during the course of the night, including my row mate who though big enough to break me over his knee, was more than happy to help this neophyte learn about some of the more esoteric aspects of the sport.   The pre and post fight interviews with the fighters showed that they were not only smart, but humble and articulate as well, and as I watched a series of undercard bouts leading up to the three title matches of the night, I began to see that my new favorite sport was much more complex than I had thought, and one that embodies some very interesting parallels with the markets.

In for a penny in for a pound

Reality rarely surpasses mythology, but the fighters I saw achieved that feat, having transformed themselves through thousands of disciplined hours at the gym into tremendous physical specimens; modern-day versions of Apollo and Zeus incarnate.  These guys are not hobbyists, floating in and out of the world of MMA when their time and schedule permits, it is their life.  Diet, nutrition, training, sparing, workouts, every aspect of their life that contributes to their success in the octagon is governed by an almost fanatical discipline.

This type of discipline would not be unfamiliar to a Paul Tudor Jones or Carl Icahn, market versions of the Greek Gods.  They have risen to a rarefied level of success by dedicating themselves to the process of learning about and mastering the markets.  This is a lesson for those that think they can participate in the markets in a casual and arms length way; being active in the markets takes focus, discipline, and most of all commitment.  If you fall short in any of those areas, its best to hand your hard-earned money over to someone who does this for a living.

Proximity defines the perspective

Upon entering the arena, the cage, though central to the scene, is almost of secondary importance to the spectacle unfolding all around you.  The fighters from this view seem to be involved in a frenetic, yet painless encounter, dwarfed and drowned out by the size and sound of the crowd.  As you get closer, all that changes.  Twenty feet from the action tells a different story, one where the punches and kicks cleanly landed have a voice and a consequence.  However there is another view in which even the minutiae of the contest shows it’s impact.

For most of the night, the well-known and respected MMA photographer Tracy Lee prowled the apron directly in front of me.  She was as close as you could be to the action without actually participating in it and her camera lens filled in the final gap, giving a perspective that is more intense, more immediate, and perhaps for some, more disturbing and harder to process, as you can see from the shot below;

Courtesy of Tracy Lee (@mstracylee)
Courtesy of Tracy Lee (@mstracylee)

In the markets your time frame defines your perspective, and finding the one that suites you best, giving you the most comfort and piece of mind, is crucial to being consistently successful.  Don’t be fooled into thinking that watching every tick gives you an edge.  There are plenty of people making money while standing at the back of the area.

Have a back-up plan

Mike Tyson is famous for saying, “Everyone has a plan ’till they get punched in the mouth,” a point I saw illustrated in very dramatic fashion.  In one match, a fighter started out aggressively, stalking his opponent around the ring.  It was obvious that his plan was to keep his foe on his heels, forcing him to make a mistake that he could then exploit to his benefit. But that suddenly changed when Mr. Fist met Mr. Mouth.  With one punch his plan blatantly failed, opening the door for a possible devastating beat-down.  However, instead of riding his orignal plan down to defeat, he moved to a back-up plan which involved reversing roles, allowing the other fighter to pursue him, while he shot jabs and kicks back. Eventually his foe wore himself down, and when the time was right he was able to resume his attack and win the bout.

Punches in the mouth in the markets come in the form of missed earnings, Fed minutes, FDA decisions, political events, economic reports, and terrorist attacks.  When they happen, knowing what do, what your alternative plan is, can help you to keep a cool head which minimizes damage and sets the stage to end up back on top.

Endurance is an undervalued asset

One of the things that struck me was how evenly most of the combatants measured up when it came to the “tale of the tape.”  Heights, weights, reaches, and builds of the fighters were remarkably similar in almost every one of the matches, and on the more elite cards it would be hard to imagine that there was much disparity in preparation or skill levels.  Thus the major determining factor between “winner” or “loser” seemed to be who had the combination of physical conditioning and mental toughness to last the full twenty-five minute bout. Those that started fast, failing to vanquish their opponent quickly, soon found themselves running out of steam, leading to critical lapses in strategy, opening the door for their rivals to capitalize on.

The ability to play the long game in the markets is not generally appreciated and one of the key reasons that most participants drop out after a short time.  Being able to stay in the game for an extended time, in order to take advantage of opportunities when they present themselves, requires an investing style that minimizes risk and can endure consistent minor losses.

Courtesy of Tracy Lee (@mstracylee)
Courtesy of Tracy Lee (@mstracylee)

Know when to tap-out

Nobody wants to lose. Each fighter spends endless hours training and preparing for their match, backed my multi-man teams, and numerous sponsors, so that when they walk into the octagon they are not only fighting for themselves, but for the hopes and hard work of everyone involved in their organization.  Yet even with that extended burden on their shoulders, they know that if they are caught in an untenable position by their adversary, they have to “tap out” or risk more serious injury.  They know that there is no shame in tapping out, and that it is just a respectable reaction to a bad situation that allows them to live to fight another day.

Sometimes we know the market has beat us.  We have hit our “uncle” point and taken our maximum allowable loss, and at that point tapping out is the only correct decision.  Why risk inflicting more damage on our P&L by staying in a losing position?  Just like with the fighter, get out, and live to fight another day.

When finished move on

After watching two guys beat the crap out of each other for five rounds I thought for sure that there would be no way that they could “turn it off” once the bell rang, the knock out was scored, or the decision rendered, but like most of my pre-conceived notions about this sport, I was wrong.  Flurries of vicious punches would end the moment the round bell rang, and gloves would be touched before going to their corners and resuming the contest in the next round.  And when the outcome was decided, no smack was talked, just sincere hugs and praise between the two guys that moments before were trying to bash each others heads in.  When it was over, it was time to move on.  What a concept.

Hanging on to the mental baggage attached to a loss, or even a win for that matter, provides no benefit. You can dissect a trade or investment to see what worked or what didn’t, but to gnash your teeth over a loss or laud yourself for a win goes against your best interest, which is clearing your head and approaching your next interaction in the market with a clear vision of what you want to accomplish and how you are going to do it.

The best fight is the one you don’t have

After the Main Event ended, as the crowd moved towards the parking lot, and the television crews wrapped up their equipment, there was one final bout.  It was the underest of undercards, with two up and coming but unknown fighters squaring off against each other, only for the benefit of their family and friends who still remained in the now house lit area.  It was a fight not so much of different skill levels as of different styles, and in fifty-three seconds it was over; with one of the combatants choking the other out without even breaking a sweat.  To say it was a “fight” would be a stretch, but to say it was a “win” was completely accurate.

A savage and bloody twenty-five minute match is what the fans, and the organizers, and the TV networks want to see, but despite the brutal romanticism attached to the winner, the goal of even the most hardcore participant is that fifty-three second win.  The fight without the fight.  One that conserves your energy, that gets you back into the gym first thing Monday morning, that gets you to your next payday quicker, and ultimately leaves you with a prettier face at the after-fight party.

Despite all the fighting metaphors in this post, the utmost goal of every market participant is to make money in the smoothest, easiest, and least confrontational way possible.  Fighting the markets, despite the stories it provides you for social interaction, is the worst possible way to try to make money.  Finding the style that works best with you personality while allowing you to benefit from the market’s moves is the ultimate win.

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