Bus Stops
Finding your own route in Trading and Investing
Chasing the Bus
Consider this: you're striving to make a living, whether through trading or investing. Instead of engaging in introspection - understanding who you are, your attitude toward risk, your preference for short or long-term positions, your execution strategy, and your grasp of charts and market history - you choose to follow the ideas of others. You latch on to the so-called "big brains," mimicking their trades.
In this scenario, you find yourself darting from one bus stop to another, trying to board someone else's bus, to follow their journey, their objectives, their aspirations. In doing so, you attempt to mimic their risk profile, their ability to tolerate volatility, their investment timeline, their profit-taking strategies, and even their potential pitfalls. Even if you had access to all that information, which you likely don't, could you maintain this strategy indefinitely, from one trading idea to the next?
Imitating successful investors isn't inherently a poor choice, but it can be disastrous without complete information, and even more so if their personality type is diametrically opposed to yours. Talk about a recipe for stress. And what happens if the situation shifts, if the market fundamentals change? Are you keeping abreast of these developments, ready to adapt on the fly?
My advice is to start by looking inward. Identify your trading/investing characteristics and focus on how to maximize your strengths. If you're keen on learning from others, seek out investors who share similar traits. This approach will feel more comfortable, more natural. After all, it's more pleasant waiting at the same bus stop with like minded individuals, enjoying a conversation while waiting for the journey to begin.
Another angle, but same premise:
When the markets align with my strengths, I ramp up my aggression, seizing opportunities and leveraging favorable conditions to the fullest. If short-term volatility is my forte, a turbulent market phase becomes my stage.
However, the economy isn't static and often presents cycles that might not necessarily align with my strengths. Patience is my weapon here. During these times, I slow my pace, minimize my exposure, and sometimes completely withdraw from certain markets. I stay at my bus stop instead of sprinting to another.
This might resemble retreating, but it's a strategic pause. It reflects an understanding that markets won't always cater to our strengths. When the current flows against us, attempting to swim upstream can lead to hefty losses. By recognizing that not every market phase is my territory, I protect my capital and retain my position in the game.
This isn't about fear, it's about respect. Respect for the market's power, for the diverse economic cycles, and for the fact that no trader can be a master of all market conditions. By adjusting my involvement to the markets that match my skills, I've successfully navigated years of economic shifts.
Remember, trading isn't a sprint; it's a marathon. The goal isn't to win every trade, but to stay in the game long enough to capitalize when your time comes. Don't fear slowing down when the market doesn't favor your strengths. See it as an opportunity to plan, strategize, and return stronger when the cycle swings in your favor.
Patience is indeed a virtue, and self-awareness your strongest ally. Understand your strengths, respect the market, and let your trading strategy reflect these realities. This is the path to success across diverse economic cycles.
Stick to your bus stop. The bus will eventually arrive.