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Department of Connections

Victor Niederhoffer: Racquet Sports and the Market

With commentary by racquetball pro and seven-time national paddleball champion, Steve "Hobo" Keely.

During the summer, one finds himself unable to make profits in markets, as prices tick exactly to one's limits without a fill and then turn wildly in the anticipated direction, or when the limits do get filled immediately trigger stops of (one looks around three times) trendists and Mr. Gambler's Ruin immediately stares you in the face.

So one turns to the one thing he knows, and inspired by Messrs. Moe and Sogi, looks for some lessons from racquet sports.

1. Don't negotiate with the ball.

Racquets: When you hit it, swing briskly, and get your racket off the ball and bring it to the opposite shoulder quickly.

i.e. Evaluate fast and follow through without reconsideration.
--Steve 'Hobo' Keely

Markets: As cannot be emphasized too many times, the house is the only entity that can grind. You can't negotiate a trade; you must swing at it for very reasonable profits vis-a-vis the rake taken out, Mr. Vig.

2. Hit every ball on the rise, and you'll add 15 points to your score each game.

Racquets: This is the advice of Lacoste, author of the best book on tennis,  and something that would have made me much better than Sharif Kahn when I played him. Work off your opponent's velocity, and move in toward the net. You have much greater angles available and you don't have to lift.

This is the last, most difficult and greatest nuance
in any racquet sport.  It compresses time.
--Steve 'Hobo' Keely

Markets: Trade at the beginning of periods rather than the end, and do take the move the mistress throws at you and hit it right back at her. (This latter must be tested, classified by season of year.)

3. Use gravity in your swings.

Racquets: Strive for the continuous swing without a break, as velocity and consequently momentum can thereby be increased and resistance reduced. Most of the good swings start high, go low, and then end high.

Consider that the most contiguous swing is a loop rather
than two lines overlapping straight back and forward.  It
is the fastest with most power, but less accuracy, and I
preferred the straight back-and-forward wing.  Yet I
experimented with the racquet underwater in the Jacuzzi
to find other advantages.
--Steve 'Hobo' Keely

Markets: Especially for summers, try buying after a drop and then a little rise, the same way tennis swings go. (But again, this must be tested.)

4. Lose weight.

Racquets: Everyone in the world loses weight in the summer except me. They're faster and in better shape.

Funny, I'm the only guy on the trail who gains weight over a
long hike.  Nonetheless, the advice is to try and stay light.
--Steve 'Hobo' Keely

Markets: You have to reduce your commissions and the costs of your operation in the summer, because the adversary is stronger.

5. Study the old masters.

Racquets: The best books on tennis are by Lacoste and Tilden; both are decades old.

Markets: Go back, a la Don Quixote, to the ancient books for lessons. The best publication about the market was The Magazine of Wall Street, and the old books featured techniques worthy of study, including cane investing and swing trading. The oldies were written for a higher common denominator, and it is easier to evaluate how they stand up over time.

Dwarves stand on giants' shoulders to see the ball,
and in any endeavor the earliest books are the best.
--Steve 'Hobo' Keely

6. The serve is more than half the battle.

Racquets:  Wimbledon will be coming up, and we will see many sets where there are not more than three strokes that one player hits. Half of all points will be made on the serve or service return. The offense is getting better all the time with the modern equipment.

Any job where the handshake or serve is half the win is
dumb.  Change the rules to enjoy and improve more.  It's
unfortunately true that in most activities, he who practices
offense over defense wins more.  The familiar learning
curve is that the player who practices defense wins initially
or at an amateur level, but he who practices offense has
the edge among the finalists.
--Steve 'Hobo' Keely

Markets: Do take riskier trades, as they have the highest reward, albeit the 75% to 100% a year that the collabs wrote about that the average IPO had to proffer just a year ago to raise funds are no longer available.

7. Whatever you do, don't admire your own shots.

Racquets:  Assume your shots will go in, and get right back to the middle of the court after you hit. Get back into the point.

Markets: Don't boast. Try to improve. Be ready to go both ways on the next trade after your first one.

8. Offense is better than defense.

Racquets: Topspin has shown itself clearly better than slice. Hardly any good players slice any of their forehands now. And only the lesser women and older men slice the backhand a la the grotesque Steffi backhand. You take too much off the ball with the slice, and the margin of error is so greatly increased with the top as the spin of the ball forces it into the court, the two aren't comparable.

Topspin is offense and slice is defence.
--Steve 'Hobo' Keely

Markets: Leave yourself more than one opportunity to get out of a trade, i.e., don't do what I did on Monday, selling a big up opening with the only scientific way to get out of it, being the hoped for exit in early afternoon. (I sliced instead of topping).

9. Be ready to experiment.

Racquets: The Hennin backhand is the best shot in the last 100 years and it does a hundred things different than its predecessors. Starting with hitting off the back foot, and dropping the racket head below the ball, and keeping the right arm a mile away from the body, and hitting the left cheek or the ball with a out spin.

A broad avenue of experimentation is found in throwing
aside normal limits.  Or, practice only outside those.  The
normal stroke and business procedure is modeled after
the perfect strokes.  Try anything but.  One example is to
contact the ball on groundstrokes as high as possible, or as
low as possible, then as deep as possible or as far forward
as possible.  There are little advantages in say, 1 in 100 of
the oddball extremes.
--Steve 'Hobo' Keely

Markets: The game's getting harder all the time. Do some out-of-box testing. Consider a new market or two. OK, your adversary has lost billions with his non-tested theorizing, and now everyone believes that your way is golden. Papers are being written proving it, including the 1987 period.) True, he didn't ever test his method (the Bishop who didn't believe in God). Now maybe you should test it. Perhaps it's the time for one's adversaries ideas to work, just as they've lost all their chips (a horrible thought), the same way it's happened to you so often.

10. Keep a lower center of gravity.

Racquets: The good players are always bending.

It is rarely written that the competitor with the lower
center of gravity has a continual advantage in moving
about the field.  There are other ways to gain this besides
bending, such as keeping the feet close to the ground
during strides.
--Steve 'Hobo' Keely

Markets: As mentioned, the adversary is tougher all the time. Be sure you have your feet closer to the ground. Costs must be reduced, frills taken out of your modus operandi. Reduce the time taken for lunch.


As one looks at these rules, one notes many similarities with those from boxing. Hopefully others will add rules from things they know about. And then a grand synthesizer will come, a Nock or Galton, an Einstein or Newton, a Cervantes or O'Brian, a Shakespeare or N.C. Wyeth, a Lacoste or Cobb, and put them into one grand formula.


Charles Pennington comments:

Yes, by starting with the racquet up high, you're able to add the energy to the system at your leisure, when you're raising the racquet in preparation for the shot. That energy is conserved and becomes kinetic energy when you're hitting the ball, with the racquet down lower. The principle is everywhere--in baseball, for example, you also start with the bat up high. However, if the player stops or slows the racquet during its descent, some of that stored energy is dissipated in his creaky joints. So keep it moving on that swing. Don't start the swing too early, or you'll have to slow the racquet during the descent.

Jack T. comments:

Never underestimate the importance of good equipment and a fair playing court Technology and the access to information, as well as regulation that levels the playing field, or provides equal access to the market, can not be overlooked. The racket does not make the player, but cracks in a frame, or deteriorating strings certainly makes consistent play nearly impossible, no matter how skilled the player.