Trading and Surfing

Trading is as exciting and difficult as any singular activity that I have attempted to master. I think a comparison to another activity I’ve mastered would serve to illustrate some interesting points. I love to surf as much as I love to trade. Surfing requires you to learn technical skills that must be mastered in order to perform well, have fun and be successful against “Mother Nature” (read - the unknowable future activity of the market) as does trading. Each activity requires you to have good tools so that you can take action when the time is right. Each activity has it’s own set of frustrations that can be anticipated but by no means predicted. Let me illustrate. Surfing requires an understanding of the ocean (very similar to understanding the ebbs and flows of the market). The tide comes in and goes out. And during each tidal advance and retreat, individual waves come in various forms, height and power. Wave heights can be anywhere between knee high and triple overhead and you have to decide how much is too much for your skill and comfort level (read - position sizing). The wind blows onshore, offshore or doesn’t blow at all, which affects the ocean surface and the ease of positioning yourself in the lineup. Positioning yourself in just the right place for the next wave is crucial to picking up the wave. Notice I haven’t said anything yet about riding the wave. OK, you’re comfortable with the size of the waves. You’ve paddled out to where you perceive is the lineup and you’re in the right place (read - you’re waiting for the proper setup); you see a wave coming and you turn, paddle and feel the wave lifting and propelling you down it’s face (read - entry). Now you must determine which direction to ride (read – long or short). As you’re pulling yourself up to stand, turn and trim the board, you quickly determine whether or not this wave is even rideable. In spite of the perception that it looked rideable when you were paddling for it doesn’t guarantee that it will be rideable after you catch it (read – unknown news event). Once you’re up and riding, many waves close out without giving you much warning and you have to be ready to kick out at an instant (read – stop-loss exit). Other waves continue to lineup ahead of you and offer options to ride through the next section and continue the ride (read – adding to your position/pyramiding). You know that ultimately the wave will end either on the beach or close out along the way and you will have to kick out or get wiped out (read - you know you will have to exit before you take off). There is no guarantee that the wave will be fun or long lasting with a nice exit giving you that accomplished feeling of success (read - profitable).
If you’re always ready for the opportunity and stay in the moment. If you keep reacting to everything that comes your way. If you keep your options open and have defined objectives, are prepared to kick out at any instant when you realize there is no more hope of succeeding, you can escape and paddle out to do it again (read – preserve your capital).