The venerable game show "Jeopardy!" has been running a "Greatest of All Time" prime time special. On Tuesday night, Ken Jennings was officially crowned the winner.
I started watching "Jeopardy!" when I was in elementary school and would pretend to be sick, so I could stay home, eat soup and watch game shows. In all the years since then, there has been little change in the strategy that contestants would employ. The show was mainly a test of a broad range of knowledge and the ability to hit the buzzer first.
In recent years the strategy employed by the players has changed quite a bit. This came about primarily due to James Holzhauer, who is a professional sports gambler. Holzhauer employed aggressive gaming strategy and ended up with winning amounts that far surpassed anything seen before.
For the top-level players, the game was no longer just about knowing the right answers. They could all answer most of the questions; the focus was primarily on hitting the buzzer quickly and finding some sort of strategy edge.
The edge that makes all the difference is the "Daily Double." "The Daily Double" allows players to upsize their bets and establish an unbeatable lead if they hit on one when they have a large number of points already accumulated and can place a huge bet. Finding the "Daily Double" at the right point in the match was the key to winning.
This has interesting parallels to trading. The lesson is that when you have an edge, then you up-size your bet. As George Soros has said, "It's not whether you're right or wrong, but how much money you make when you're right and how much you lose when you're wrong."
In the course of our trading we will hit on a "Daily Double" every once in a while. The opportunities will occur randomly and unexpectedly, but when they do occur, the smart move is to capitalize on them the best we can. Yes, it involves increased risk, but to be the "Greatest of All Time," you have to be aggressive when you are offered an opportunity to make a big bet with reduced risk.
Players on "Jeopardy!" had been playing the game the same way for decades, but the truly great figured out that it took more than knowledge to be a winner. It took a strategy.
