Tennis legend Roger Federer gave the commencement address at Dartmouth earlier this week… and it was dynamite.
I want to share part of his speech with you because I think it has some important lessons that can make us all better investors. When it comes to being great at anything, be it tennis or trading, the importance of the mental component can’t be overstated. There’s a big difference between simply going through the motions and actively trading “in the zone.”
The last thing you want to be is a trader that responds to every headline and price swing in the market. So, what you need to ask yourself is this: Do you want to be right? Or do you want to make money? Because in markets, there’s a huge difference. Before I explain, let’s hear right from Federer…
The Biggest Winners Keep Things in Perspective
Federer’s speech to the Dartmouth Class of 2024 was a great one…
"Perfection is impossible. In the 1,526 singles matches I played in my career, I won almost 80% of those matches.
“But what percentage of points did I win? 54%
“In other words, even top-ranked tennis players win barely more than half the points they play.
“When you lose every second point on average, you learn not to dwell on every shot.
“You teach yourself to think:
‘Okay, I double faulted...it's only a point.
‘Okay, I came to the net and I got passed again...it's only a point.
“Even a great shot, an overhead backhand smash that ends up on ESPN's top 10 playlist – that too is just a point.
“Here's why I'm telling you this.
“When you're playing a point, it has to be the most important thing in the world. And it is.
“But when it's behind you, it's behind you.
“This mindset is crucial – because it frees you to fully commit to the next point with intensity, clarity, and focus."
Learning to Take a Fall
If this quote says anything, it’s that Federer knew how to strategically take a loss - a highly underrated skill we’d all do well to develop.
We all get stopped out of a position at one time or another. If you ever find yourself frustrated over being stopped out, and then subsequently “revenge-trading,” you’re falling into a mental trap that ensnares emotional traders. That inability to take an “L” in stride robs them of their profit potential.
You don’t have to like it - I’m not sure anyone does - but you do have to learn to quickly move on. Market math shows that it’s not even required to be “right” over half the time to be profitable. In fact, the system I use only needs to be correct 25% of the time to just break even.
So, I’m sure you can imagine what happens when I’m right 50% of the time! I’ll have more to share with you about this in the coming days and weeks.