This article is the last in a series looking at Jack Schwager’s classic investment books. The goal is to study interviews with famous traders and apply their wisdom to daily fantasy sports.
Dr. Van K. Tharp is not a trader. He has spent the majority of his professional life working to understand the psychology behind trading. After working with some of the greatest traders of his generation, he is considered to be a leading authority on the complex tricks our minds play on us in trading situations.
As someone who has seen just about every mental hurdle that a trader must overcome, Tharp spends the majority of his Market Wizards interview discussing those issues. He talks about the profile of a losing trader, how stress causes traders to follow crowds, and some of the similarities that successful traders demonstrate. Let’s take a closer look at three of the most notable quotations from his interview and see if we can’t apply some of his wisdom to DFS.
Understand Who You Are Modeling
The composite profile of a losing trader would be someone who is highly stressed and has little protection from stress, has a negative outlook on life and expects the worst, has a lot of conflict in his/her personality, and blames others when things go wrong. Such a person would not have a set of rules to guide their behavior and would be more likely to be a crowd follower. In addition, losing traders tend to be disorganized and impatient. They want action now.
Tharp has built his entire career on understanding the mindset of successful traders. However, it is worth noting that losing traders demonstrate many of the same traits that we would expect from poor performers in any industry. Many of these symptoms are the first signs of trouble for traders and DFS players. If you find yourself modeling any of these behaviors, you should view that as a red flag.
Just as we can see these behaviors in losing traders and DFS players, we can see opposite behavior in successful role models. By watching videos like the Inside the Lab series (available through our Premium Content Portal) subscribers can learn what experts like FantasyLabs Co-Founder Peter Jennings (CSURAM88) are thinking during their research process. On his personal blog, Labs Co-Founder Jonathan Bales has talked about the positive expected value of the long road. Losing players tend not to act with the long road in mind.
Avoid Being a Crowd Follower
Simple solutions are rarely correct. When people are stressed, they also tend to be crowd followers. The behavior of others provides a simple example to follow. Crowd followers don’t have to make decisions, but crowd following is a sure way to lose money in the markets.
Just as going along with the crowd is a sure way to lose money in the markets, it is also a sure way to struggle in DFS tournaments. Groupthink causes the majority of DFS players to gravitate toward certain players on every slate, often leaving players with similar upside dramatically under-owned. (Bales has written about this industry tendency extensively in his books.)
Because we offer industry-leading ownership projections in our Player Models, we give subscribers a huge advantage in tournaments. When making a tough decision between two appealing options, you can often give yourself an edge by simply going with the player who is likely to be less popular. After a slate starts, you can analyze your decision-making with respect to ownership via our DFS Ownership Dashboard.
Many Roads to Profitability
In fact, when you find extensive similarities between two excellent traders who seem so different, then you can begin to assume that those similarities are essential to successful trading. Both traders, for example, developed models for how the markets work and did extensive research to test those models. Although their ideas are very different, I think the process of developing and testing some sort of model is probably very important.
We have seen this idea unfold right in front of us throughout the Market Wizards series. We have looked at a wide range of traders with dramatically different styles, but despite their differences there are many ideas they all have in common. In a similar fashion, Bales and CSURAM88 have different approaches to DFS, but each of them has a successful system and personal models stemming from their research.
Not only does Labs give us access to Player Models created by experts, it also gives us the power to create our own models and the ability to test them. We can also use the Trends tool to isolate specific ideas and backtest them to see how they have performed in the past. There are many paths to profitability in DFS, but this type of research is at the beginning of every one of those roads.
Tharp and DFS
After looking at nine different traders as we made our way through Market Wizards, we get a different point of view as we close the series with Dr. Tharp. His psychological approach to trading serves as a reminder that we must be aware of how our thinking can influence profitability.
By following Tharp’s advice about understanding who you are modeling, avoiding crowd following, and deciding what path you wish to take, you can create a mindset that allows you to use our tools in a maximal way. At that point, you’ll truly be a DFS Market Wizard.