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Winning the Loser’s Game

May 31, 2013



In the book, Investment Policy: How to Win the Loser’s Game, author Charles D. Ellis discusses the interesting conclusions of Dr. Simon Ramo on playing strategy. Extraordinary Tennis for the Ordinary Tennis Player (New York: Crown Publishes, 1977) identified the difference between a winner’s game and a loser’s game.  Over a period of many years Dr. Ramo observed that tennis was not one game, but two: one played by professionals and a very few gifted amateurs; the other played by all the rest of us. After extensive scientific and statistical analysis, Dr. Ramo summed it up this way: Professionals win points; amateurs lose points.

In expert tennis, the ultimate outcome is determined by the actions of the winner. Professional tennis players stroke the ball with strong, well-aimed shots, though long and often exciting rallies, until one player is able to force an error by his opponent or to drive the ball just out of reach. These splendid players seldom make mistakes.

Amateur tennis, Dr. Ramo found, is almost entirely different. Brilliant shots, long and exciting rallies and seemingly miraculous recoveries are few and far between. The amateur player seldom beats his opponent; rather he beats himself all the time. The ball is fairly often hit into the net or out of bounds and double faults at service are not uncommon. The victor in this game of tennis eventually gets a higher score because his opponent is losing more points.

As a scientist and statistician, Dr. Ramo gathered data to test his hypothesis in a clever way. Instead of keeping conventional game scores—love, 15 all, 30-15, and so forth—he simply counted points won versus points lost. He found that in expert tennis about 80 percent of the points are won, but in amateur tennis about 80 percent of the points are lost through errors.

WHAT DETERMINES THE OUTCOME OF A TENNIS MATCH?

Is it the equipment, the line judges, the weather, or even the players themselves that controls the outcome of a tennis match.

So then, what controls the outcome?

What determines the outcome of a tennis match is the movement of the ball across the net.

The player who can stay focused and most effectively move the ball across the net will look up at the scoreboard and notice they’ve won the match. There is no need to be concerned with the score. This will only distract you from being the best you can be and focusing on the task at hand. This is true for tennis and for trading.

For me, my greatest success came when I finally decided to forget about the money (the scoreboard) and just concentrate on being the best trader I could be, which was my version of moving the ball across the net. I focused purely on making good decisions and working on my weaknesses until they became my strengths (not losing points).

Once you learn to move the ball across the net effectively on a regular basis, monetary success will come as a natural byproduct of your efforts.

Instead of worrying about the money, concern yourself with doing the right thing according to your plan. Making money is the result of effectively carrying out a well thought-out plan that utilizes sound principles. Focusing on the outcome will only distract you from the work needed to do achieve the result. Go into each trade with a plan and execute that plan flawlessly.  Later, you can evaluate the trade during a post-analysis session and decide if you need to make adjustments.  Then, you go in with your new plan.

Forget about the score and the money; focus on moving the ball across the net.

Mark Minervini



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