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Trading Lessons From Chess

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Lazyluchi
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March 23, 2022
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Trading Lessons From Chess

Chess is a game of strategies. It tests your foresight, patience, strategic thinking, and the ability to get into your opponent’s mind.

Chess —Sounds familiar? Most times, you see the villains in movies—keep playing chess which I find weird. I feel like it should be the other way round. Anyway, this board-game is one I find really interesting.

15 days ago, I recently got interested in chess. I’ve known there’s a board-game called, “chess”.. Never took interest in it—Till now. I want to believe that every-thing that has happened  in my life is for a major purpose. All my life, I’ve had lots of interest and all these so called—interest, have been helpful in my trading career. However, “Chess” isn’t exempted!

On Friday, the 18th of March, 2022. I came across this chess app.. Lichess. It’s really advanced and it’s lessons are free. So, I got excited because the previous app I was on: wasn’t. Anyway, fast-forward that. I continued learning to play this amazing board-game and realized how much it’s lessons are related to trading. Like trading, in chess, you need a plan, strategy, opening, middle-game, patterns, and tactics. The game of chess is really an interesting one and every-one aims the grand-master title, however, only a few reach it.

According to wiki-how, to become a grandmaster requires years of practice, having strategies, learning different tactics, and finally, executing endgame situations. Sounds like a lot of work. That’s why only a few ever attain the title, “Grand-master”.

Trading isn’t so different. In trading, statistically, only 1% of traders are consistently profitable (I can’t even say I’m there yet). That’s why I decided to learn chess because I needed to improve my co-ordinations, mind-set and patience. In addition, I wanted to get better at my executions (opening, middle game, and end game).. What’s the co-relation? You might ask.. Well, for me—it’s really not necessary. Not all traders take on chess to improve but I did because there’s always a lesson to learn. Moreover, trading is one career/profession I obsessively want to succeed at. Therefore, I’ll do whatever it takes to become successful at it. That being said, here are trading lessons I got to learn from chess..

Trading Lessons From Chess – Hard To Master

Fun fact: Chess is actually very easy to learn.. It took me 2 days to learn to play chess; Two. However, the thing about chess is—mastery. Mastering chess can take infinity—before you become a Grand-master, You could start having grey hairs. Trading isn’t so different. Months ago, I got a text from a lady. She asked, “How long did it take you to learn to trade”. I answered, “3 months”.. However, it’s being a year and a half and I haven mastered it. Learning to trade; demands a lot from you—Likewise, Chess.

Trading Lessons From Chess – Go For The Highest Value But..

Okay stranger, I know you ain’t a chess player but—let me gist you about the value of your chess pieces. The queen is 9, Rook 5, Bishop 3, Knight 3, Pawn 1 and the King—That lazy one that moves just around “his” vicinity, is priceless.. That’s right, Price-less!
Now, imagine targeting your opponent’s King and losing yours in the process or a scenario when there’s an exchange you take your opponent’s rook; he takes your queen. You know what you just did, you just exchanged one of your highest value. Not here to teach you chess but, the lesson here is: Go for the highest value but, don’t lose yours in the process.
Likewise, in trading, Most people don’t use Target-profits, they believe in, “TP open”.. I just think that’s greed. Yes, go big but—don’t go home while at it. Always, protect your value. Risk management is key. Before any exchange in chess, most players ask themselves, “is this worth it?”. As a trader, is it really worth it?
When you leave that TP open—What happens when the market decides to reverse and you never took any profit? That is, you lost all you gained because you wanted to take the highest value.
Go big but, don’t go home!

Always Have An End game, Middle game, And Opening

The next lesson to get from chess is: having a plan for every situation.. In chess, how you start matters.. Also not as important as how you end. There’re several openings, middle games, and end games in chess.
Most players, have strategies and game plans for everything. They think ahead; act ahead..
Do you?
Furthermore, in trading, Your entry is important but not as important as your exit. Most traders don’t have an exit plan, trade management, or an entry plan. However, in chess, there’s a saying, “control the center”. If you can control the center you are way ahead of the other player.  Similarly, in trading, trade management requires managing a position while in it. If your trade management is thrash—no matter how good you are, you’ll always lose. Ergo, Traders should always have: openings, middle games, and end games.

Trading Lessons From Chess – Recognize Patterns

Pattern recognition is a skill every trader should have. In chess, recognizing patterns helps you to get away from traps by the opponent. Most chess players cram patterns—The language of chess is like a math formula.. I remember my first time coming across one language, “Qxa8#” or “Rxb8+”..
You’re probably wondering, what the h&$l?
Reading that, knowing the pattern, you’ll know the first is the Queen doing a check-mate and second is the rook doing a check.
However, in trading, recognizing patterns is almost similar, when you spot a double top, you know them bears are coming through, Likewise, spotting an inverse head and shoulder, means the bulls aren’t chilling anytime soon. Learning and being able to spot patterns will save you in going against trends, and the popular saying, “the trend is your friend”—isn’t a lie. However, most traders still go against the trend. Funny, because of their lack of pattern recognition skill, they can’t even tell which trend a market is in..
Listen! if you don’t have a pattern recognition skill in trading—You’re toast!

Don’t Lose Your King

Remember when I said, Your king is priceless. In the game of chess, Once your king is in check—that’s the first warning. Hence, If you do nothing about that, then the check becomes, “check-mate”. That means, the game is over.
Furthermore, I don’t think there’s any other way one can win in chess unless by check-mating a king.
Similarly, in trading, the “king” is your capital. The good thing about trading is—there’s a way you can control that. The most important tool in trading, Yeah, the “stop-loss”. Using a stop-loss can prevent you from losing your king.
As we all know, once the capital is gone, you can’t trade no more. It’s game-over.
Protecting the king in chess, is maybe every chess players first rule. I don’t know why traders—neglect their capital. You have to have a rule for that. For me, I try as much as possible to never risk; 1-1.49% of my account. That way, I remain in the game no matter what.
That way, I can avoid the check-mate!

Know The System

When I started learning chess, I had to know the system. Learning the basics, how the pieces move, different checks, different mates, tactics, end-game, middle-game, defense, openings, and even as far as, studying people’s games.
All this had to be done. You can’t win in chess if you don’t know the system.
Likewise, in trading, You can’t win if you don’t know the system.
Do you know your basics? Why the market moves the way it does, the trend, the market cycle also known as, market stages, different chart patterns, reading them candlesticks..
Listen! if you don’t know all this, you will FAIL.
You have to—know the system. There’s no short-cut to this; you can’t win if you don’t know the system.

Trading Lessons From Chess – Learn From Failures

The best way to get better in chess is when you fail. Funny, but true. Thank goodness we have apps that allow you analyze your plays after a loss or win. When you lose in chess, don’t just go and chill, learn from them failures—analyze every single move, review them and know what you’ll do when you come across such again.
Similarly, in trading, When a trade hits stop loss, always know what went wrong—what can you do better?
Always be curious! Don’t allow failures just be failures. Let your failures be lessons. In trading, most traders never have the need to learn anything until they lose. Failing, pushes you into curiosity—curiosity brings about learning.
Now, look for those losses and know what your mistake was.  Figure out what could have been done. Hey, also—Try not to repeat!

Trading Lessons From Chess – Learn To Spot Opportunities

Opportunities are everywhere in the game of chess but—most don’t see them when they reveal themselves. Learning to spot opportunities is just another great skill one needs to acquire to be a better chess player. The best way to spot opportunities is: to have a strategy. Once you have a strategy, then it’s much easier to know what you need to look for. Trading isn’t any different having the right strategy helps you in spotting these opportunities when they show up. A trader without a strategy; can’t tell when he’s(she’s) supposed to buy or sell.

Furthermore, I have a very simple strategy called: the 3-way with a retest trigger. With this strategy, I can easily call tops and bottoms. That is, when the market is about to reverse, I can easily spot it—because there are patterns. These patterns are in the strategy and with the strategy, you get to spot the opportunities and take the trade. So, do you have a strategy, if yes, What is it?

Be Decisive, Aggressive And Take Action

Finally, the last trading lesson you’ll learn from chess is: being decisive, aggressive and taking action. A short anecdote, my early days of learning to play chess, I realized that I focused more on defense than attack. Each time my opponent came closer, I had no way of defending my king. Most chess players are known for being decisive, aggressive and actually taking action. Chess players are actually one of the smartest people in the world. It’s one thing to be decisive but—not aggressive, then knowing what to do but not doing it. These guys, do everything. They know when to be decisive, aggressive, and also when to take action.

Likewise, in trading, most traders are indecisive and it’s usually because of fear. Being indecisive in trading, one can’t exactly be aggressive. Because, when you’re not even sure and you’re scared of pulling the trigger, how can you? I’ve met with traders who are really great at analyzing a pair but: they never take action. So, having these three combos at once will make one a really successful trader. Before I go, let me add one more lesson. Learn to be responsible for your every decision. The chess players take full responsibility for every move they make—no matter the outcome. They never have to blame any-one for their failures. Why do traders do that?

Copyright © Lazyluchi 2022

This article is not entirely a work of fiction. The names, characters and incidents portrayed in it are the work of lazyluchi’s imagination. Any resemblance to actual persons, living or dead, events or localities are entirely coincidental. 

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Lazyluchi

A Nasdaq100 chartist

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Lazyluchi

A Nasdaq100 chartist

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Copyright © 2022 lazyluchi