Trading is Survival of the Fittest – Will You Evolve or Die?
Written by MOKI.JR
“It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself. – Louisiana State University business professor, Leon C. Megginson – 1963”
The first step is to learn to survive, to stop hemorrhaging money every year and start keeping your head above water, so to speak. To do this, you must change. You cannot keep doing what you’ve been doing if that hasn’t been working for you. Only those who learn to evolve and learn from their trading mistakes will be able to survive long enough to thrive as traders (make money).
So, how do you become the fittest trader you can be, so you cannot just survive but thrive?
You’ve got to optimize. (Pretty good rhyme there)
How to be the “fittest” trader you can be (so you can more than just survive)
- Preserve capital:
If you want to survive, preserve your capital. In the wild, an Australian saltwater crocodile is one of nature’s most finely-tuned and evolved predators. Another highly-evolved, and finely-tuned predator is the African lion. Both amazing predators display behavior that as traders, we can learn from. One such behavior is the way they conserve their energy for the easiest (weakest) prey. They may wait for days before finding an ideal prey, they certainly don’t go charging after everything they see, because they know that will result in starvation. Over time, they have adapted and evolved to learn that waiting (being patient) is the quickest way to get a good meal. They preserve their capital (their energy) so that when an ideal prey comes along they can hunt it and kill it with ease. As a trader, if you go risking your money on every little intra-day pattern you see, you’re going to quickly run out of money (capital) and then when a good / easy trade (prey) comes along, you’re going to be crying on the sidelines, wishing you had been patient and conserved your capital better. Learn to trade like a crocodile.
- Pick trades wisely:
In a similar vein to the point above – Just like predators choose their prey wisely, so you must choose your trades wisely. You cannot throw your capital after bad trades, you must stay disciplined and remain patient. Just like a lion isn’t going after the strongest prey, he is choosing the easy / obvious ones, because he knows his energy reserves are limited and if he continues to expend energy and get no prey, he will die.
Similarly, if you continue to over-trade and not follow an anticipatory trading plan of waiting for high-probability trade situations to set up, you are going to quickly lose money and your trading account will also die.
Like Warren Buffet said; trading is a no-called-strike game – you don’t have to swing at every pitch!
- Understand that time will help you:
Evolution takes many, many years to act on a species, as organisms change and adapt to their environments. Over time, you will learn from yourself and others and become a better trader. The point here is, you can’t expect it to happen overnight. The earth is 4.54 billion years old and the human brain didn’t form until about 7 million years ago, evolving into its current manifestation mostly over the last 2 million years. The point is, for things to become efficient and perfect, it takes time, no matter what it is.
The sooner you accept that you aren’t going to get rich overnight in the market, the sooner you can start on the path to profitable trading. Think about trading like a freight train; it takes time to get up to speed, but once it does, it’s hard to stop. However, if you try to go too fast too soon, you’ll “de-rail” and lose any chance of really making it. Start small and slow, learn more until you really know what you’re doing, then over time you will know when to risk more.
- Develop and use your trading intuition.
As you grow and evolve as a trader, you will develop a trader’s gut feel or intuition. This is one of the last pieces of the puzzle that will come after you consistently do all the other things discussed in this lesson. The best traders, like the market wizards, can look at a chart and instantly have a high-probability gut feel about where it is going next. From there, they need only wait for an entry trigger, proper risk reward scenario and execute their trade. To someone new to trading, this might look easy, but they aren’t seeing the years of persistent dedication to the craft that led up to that point.
- Evolve / adapt:
The most important piece of the puzzle of becoming one of the “fittest” traders, is accepting that to progress and profit you must evolve and adapt.
First off, in the beginning, you must study and learn how to trade properly and as time goes on you will continue to learn from the charts and from studying the price action on the charts. You then must begin the process of trial and error and of learning from your past mistakes and evolving from a beginner to an intermediate trader.
Next, understand that adapting and evolving also means you can adapt to changing market conditions. If you keep trying to trade a trending market as it transitions into a range-bound or consolidating market, you’re going to lose money. The ability to look at a price chart, interpret the price action story that’s being told on it and act accordingly, is how you know you’re on the right track.
You must learn from mistakes and from screen time. If you cannot use your mistakes to your advantage, to evolve, you’re not going to make it as a trader. So, don’t let mistakes get you down, look at each mistake as a chance to learn something and to improve.
What did you think of this lesson? Please leave your comments & feedback below!
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