The disproportionate rewards of Risk Evaluation

80% of tournament revenues in professional golf are won by the top 300 players. The remaining thousands of professional players share the other 20%. Being ranked in the world’s top 50 provides you access to compete in the world’s most lucrative golfing events. The rewards are disproportionate! For those that achieve this feat, financial security is all but assured, for those who fall outside of this elite group, a challenging year-to-year existence known as the “grind” awaits. Such is the top-heavy nature of professional golf.

39 months ago Bryson DeChambeau was ranked 47th in the World Amateur Golf Rankings (WAGR) in golfing terms a world away from these elite professionals. This week he is a two-time winner on the PGA Tour and comfortably ranked inside the world’s top 50 professional golfers. So how did he achieve this remarkable feat?

One look at Bryson’s attire, golf clubs or his golf swing and you will see why he is recognized as one of golfs “characters”. He has his own way of doing things. However, do not let this unique exterior distract you from the fact he is an extremely effective learner and a fine player. As BodiTrak one of the game’s leading technology companies observed “Bryson is among the most data-friendly athletes in sports. He doesn’t seek information for the sake of information, but information for greater awareness.”

One of the most vital skills to learn in competitive golf is how to manage your way around the course. As Jack Nicklaus noted, “a big part of managing a golf course is managing your swing on the golf course. A lot of guys can go out and hit a golf ball, but they have no idea how to manage what they do with the golf ball. I’ve won as many as many golf tournaments hitting the ball badly as I have well”

Many young players attempting to make the “leap” in performance from amateur to professional make the fatal error of changing the way that they play to become more aggressive in their course strategy. They do this in search of more birdies and lower scores. Bryson however took an alternative route.

Speaking after his NCAA victory in 2015 which turned out to be the spark which ignited his improved play. Bryson credited Scott Fawcett and his Decade system with saving him a shot per round, which in golfing terms is significant. Not by being more aggressive but by better understanding risk and reward. Bryson said of Scott “he’s helped me to understand the percentages of going for flags, when to go for flags and when not to go for flags.”

By learning from others and developing a fact based approach to course management, Bryson has been able to develop his risk reward skills to the point where in a short period of time he he has been able to compete with the best in the world. Central to this has been his ability to better understand risk which has allowed him to plot more effective course strategies. These have culminated in two PGA Tour victories.

Bryson enters this week’s US Open in fine form after his win in the Memorial Classic last week. Whether he can claim his first major title in arguably the toughest set ups in all of golf will be determined by how effectively he is able to manage golf's two great adversaries-the course and himself.

The same is true in trading as it is in golf in that being balanced emotionally corresponds hugely with one’s tenacity, in managing risk and reward. Most often, traders in desperate times are tempted to become more aggressive in managing their current trade positions, which could eventually lead to ‘over-trading’ or ‘revenge-trading’.

As mentioned above, one of the most vital skills is to manage your way around the course, consistently throughout its pre-scheduled timeline. Similarly, a trader needs to stay in focus to be able to manage his way around the market's Economic and Political timeline, which could consist of Central Bank Interest rate announcements, major Economic Data releases as well as a sudden breakout of news or Geopolitical catalysts.

There are many routes that lead to becoming a pro-golfer and the same applies to becoming a pro-trader but both require a diverse skill set to be successful.  A trader that manages to be in control in both his mind and emotions, enables him to manage his risk appetite, whilst keeping the pre-set money management rules in-tact, in most market conditions.

So, what are the main skills needed by a trader in cushioning the impact of a major or unexpected  risks? Well let’s start with a question to answer that question - what is the mind without the brain? In recent research, it has been proven that successful traders are usually able to balance the activities between both hemispheres of their brain. The one special tool that could help with that ‘balancing of your Brain hemispheres’ is a ‘well-balanced’ Trade Plan.

Want to know more on ‘How to train your brain to be resilient to volatile Markets’ Register today for FP Market’s newly launched, Forex Risk Management Series of Online Courses.