7 Monopoly Lessons for Traders

by | Dec 19, 2023

You can learn a lot from the classic board game we all know and love: Monopoly.

And as a trader, if you decide to play it again with your spouse or children – you’ll find the game to be very different.

That’s because you have a better sense of risk, reward, probabilities and money management.

You have the patience to grow a sizeable portfolio and eventually WIN!

But before you do delve into your past, I want to share 7 important lessons I learned about trading from Monopoly.

  1. Hold Cash: The higher earner has the upper hand

In Monopoly, the richer always has a stack of cash at the ready.

Just like the Casino (where the house holds most of the money).  

And where the money is, is where the advantage lies.

Similarly, in the trading arena, the money you have on hand is your golden ticket to seize profit opportunities.

You know when they say, we are still counting our money?

It’s because you have cash in hand rather than tied up in different assets.

So with trading and with Monopoly, cash is king.

You always need money to:

  1. Have funds to buy or sell more markets

  2. Be able to control your risk and money management

  3. Work on your Drawdown control methods

  4. Peace of mind you’re in it for the long haul

No matter how many trades or positions I take, I always make sure to have at least 90% of cash in the portfolio at any one time.

 

  1. Be Patient: Not every roll is a winner

Impatience is the enemy of traders.

In Monopoly, you don’t win by making reckless moves at every turn.

It’s about waiting for the right moment to strike.

It’s about being patient to wait for the right property to buy and take advantage of.

It’s about waiting for your opponent to land on your property for you to get paid.

All in good time my friend.,

Apply the same philosophy to trading.

The market will throw its share of doubles and snake eyes your way, but success lies in patience and strategic precision.

You need to be patient for:

  1. The high probability trade to line up

  2. The markets to play out

  3. The drawdowns to end eventually

  4. Your portfolio to grow at a slow but steady rate

Patience is EVERYTHING.

Monopoly teaches us the value of holding onto our hard-earned cash. Similarly, in trading, preserving your capital is the name of the game.

Avoid risky moves that could bankrupt your portfolio, and remember, sometimes the best move is not the flashiest one.

  1. Don’t blow on the most expensive stuff

Just because Boardwalk has an expensive hotel doesn’t mean it’s the winning move.

Similarly, the most expensive stocks or markets like Brent Crude or Indices like JSE ALSI 40 aren’t always the path to success.

First, you might not have enough funds to accommodate the positions.

Second, the markets might not have aligned perfectly to your strategy.

Third, a high price market might be in a BUBBLE which is ready to pop.

Fourth, it might be stressful putting in a large margin of funds to hold a more expensive stock i.e. Facebook, Berkshire Hathaway, Apple etc…

Astute traders know that value can be found in unexpected places.

You might find even better profit opportunities in other Blue Chip stocks that don’t even cost 1/10th of the price.

  1. Diversification and Opportunism: Building houses on every colour

Monopoly teaches us the power of diversification.

There are different properties with a variety of prices and conditions.

You need to learn how to spread your investments wisely, and be opportunistic.

Just as building houses on every color can secure your Monopoly victory, diversifying your portfolio across sectors, markets and positions can mitigate your risk and boost your chances of success.

  1. Strategic planning trumps luck

I have to admit that, luck does play a role in both Monopoly and trading.

It is luck to not roll the dice and land on “Go to Jail”.

It is luck to not pick up a Chance card saying “You have to pay rates and taxes”.

Same with trading.

It is luck getting into a high probability trade and then the market actually playing out.

It is luck being in a strong and favourable market environment for your trading system.

It is luck having the market price shoot up past your take profit due to some external event.

But trading and Monopoly are both very much strategic planning processes.

 

You need to plan your moves carefully.

You need to act on your moves, based on probabilities.

You need to risk accordingly to not go bankrupt.

You need a strong and well-thought-out trading plans.

Conduct thorough analyses, and stick to disciplined strategies.

And this is how strategy and luck will help you increase the chance of success.

  1. Negotiation mastery

Monopoly is not just about rolling the dice; it’s about negotiation.

You are playing against opponents of different advantages and styles.

You need to learn how to negotiate, aid and help each other – before you beat them!

I don’t know how else to explain this :D.

Trading also involves striking deals.

You’re hitting bids (when selling) and offers (when buying).

You’re betting against your counterparty (investor, trader or market maker).

You’re negotiating prices and moves.

The choices you make will give you the significant edge and help streamline your profitable journey.

  1. Passive Income Key: Collect $200 as You Pass Go

The exciting and genius of Monopoly lies in the sweet reward of $200 every time you pass Go.

You know that feeling of waiting and playing your turns. Going through the good Chance cards and the Bad (going to jail).

But when you are out and you pass Go, you can to collect your wage of $200.

This is your special passive income secret weapon.

You don’t just stick to what you have, you build on it and use what you newly have to grow your portfolio.

The same works with trading.

Each month, you receive a salary. And you spend, save and invest.

So if you want to grow your trading portfolio using the compounding strategy, you might as well build on it.

You might as well accelerate your trading journey.

You might as well let your money work for you!

Embrace the power of compounding, re-investing and depositing, and you might find yourself collecting much more than $200 as you navigate the trading board.

Let’s sum up the Monopoly Lessons Traders Can learn:

  1. Hold Cash: The higher earner has the upper hand

  2. Be Patient: Not every roll is a winner

  3. Don’t blow on the most expensive stuff

  4. Diversification and Opportunism: Building houses on every colour

  5. Strategic planning trumps luck

  6. Negotiation mastery

  7. Passive Income Key: Collect $200 as You Pass Go

FINAL WORDS:

The trading board is yours – now go bankrupt the market, one strategic move at a time!

 

Trade well, live free.

Timon Rossolimos
Founder, MATI Trader

 

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Trade well, live free.

Timon Rossolimos

Founder, MATI Trader

 

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