For traders far and wide, summer holiday can be a much-needed getaway, a chance to enjoy the company of friends and loved ones, make memories, perhaps cut loose a bit, and in all, disconnect from the markets. Or so I thought… But no there were trading lessons learned while I was on a beach!
You see, as I sat there on the beach, cold drink in hand, and taking in all the beautiful sights and sounds just as I intended, it suddenly hit me: several things oddly symbolic of the markets were there around me, and there were trading lessons to be learned even though trading was supposed to be the furthest thing from my mind!
Perhaps a little begrudgingly, I took a few moments to think about those trading lessons, and before I mentally “checked out” once again, I typed a few notes into my phone so I could share the ideas with you later on.
Well, that time is now, and so I give to you some helpful, albeit surprising trading lessons that occurred to me while on holiday at the beach.
Price action in the financial markets often imitates the waves, with movements occurring at random intervals, and no two ever really “perfect” or the same. Some moves are large, and some small. Sometimes set-ups occur very close together, while other times, they happen further apart…much the same as the waves. It’s a powerful phenomenon, and one that inspires a number of valuable trading lessons.
For one, I thought about the sheer power of the waves, and how sometimes, relative calm would be interrupted by a surprise wave suddenly crashing to the shore. I then thought about all the hidden dangers that lurk there beneath the waves, things like predators and the undercurrent.
Swimmers and boaters are always advised to take precautions, just like we traders are with respect to volatility and factors like news and economic data, monetary policy shifts, algorithms, and the like. These things are forever in play and lying just below the surface, and mean that a healthy dose of respect and proper risk management is vital. You really shouldn’t so much as “dip a toe in the water” without them!
I picked up a few good trading lessons from watching the surfers, and spent quite a while observing them. Some fared better than others. A few hurriedly tried to catch every wave they saw, but others were more selective and calculating, waiting instead for that one ideal wave before confidently hopping on.
I likened that to trade selection, where, just like with surfing, it’s important to isolate the most worthwhile opportunities, and best to let any others simply pass by. Small waves with no momentum most always produce a “wipeout,” and that applies to both trading and surfing. I guess I can now say that I’ve seen it happen firsthand in both!
I also noticed how the surfers, once that good wave finally came, had only a short window to take action if they were to catch it at all. There was really no time for hesitation, and once they spotted their opportunity, decisive and confident execution was a must. Sound familiar?
Sure, longer time frames like the daily are more forgiving than the intraday frames, but regardless, speed and decisiveness help traders the same way they do surfers. That’s because, like the waves, price action changes over time, and even great set-ups can fizzle out almost as quickly as they came. Either you get on while you can, or you get left behind all wet!
See also: How Traders Can Stop Self-Sabotage
Lastly, while watching the surfers and the waves, I came to view the life cycle of a trade in a way I had never before considered.
You see, I remember admiring quite a few surfers as they rode waves with such poise and grace, right up until the wave’s momentum ran out, at which point they made all sorts of herky-jerky moves while trying to muscle the board further on their own. It was like they held on too long, and inevitably, they fell off rather awkwardly. I remember thinking “What an unfit end to a great ride.”
As far as trading lessons go, I think that’s quite a profound one, and it helped me see more clearly than ever that the object is not to catch every dollar of every move. Instead, I want to get the meat that’s in the middle, get on and get off with grace and poise, and then turn around and look for another opportunity to do it all over again.
I hadn’t really used waves as a reference point for that in the past, but I find myself thinking more and more about it now.
Millions of people (myself included) love the waves for their serene beauty, and also appreciate that there are powerful forces at work there that are much bigger than any of us. The sea, afterall, is infinitely powerful, and when extreme turbulence strikes, it becomes a dangerous place that deserves our full respect. How’s that for a market metaphor?
Now certainly, I didn’t expect to encounter these trading lessons from my cozy little spot on the beach, but that goes to show that trading is a lot like life. So if you’re battling some trading hang-ups, or looking for some insight or a calming reference point to use in your trading, I derived more than I ever thought I could just by sitting around watching the waves. Maybe you’ll be inspired by them, too.