7 Ways Hiking is like Trading
In January 2015, over Martin Luther King Day weekend, some friends and I went to Gatlinburg, TN, rented a cabin, and went hiking. I love the mountains, hiking, nature, beautiful trees, clean air, exercise, and time with friends. It was just great! After a hearty breakfast we drove around sightseeing and headed towards the Rainbow Falls hike. It was 2.7 miles one way and is rated a moderate climb: 8.8 on a 1-20 scale, so it was a comfortable physical endeavor for all parties involved, or so we thought.
The entire hike took about three hours. I'll be honest, it was pretty arduous. I am in de-cent physical shape (at least I would rate myself that way), but this hike was pretty intense. The most intense hike I've made to date was KoKo Head Crater in Hawaii. This is the pic from the bottom. I truly recommend this experience if you ever make it to Oahu, Hawaii! It's free to park and hike and what a view at the top! Below are the links I made between hiking and trading.
1. It's going to take time: When people trade, they want to make money. I get that. Money is fun! It's a great tool and allows people to express more of who they are. Money often times just accentuates who we are. If you aren't thankful for what you have now, you won't be thankful for what you don't have. In a hike you're going to sweat, breathe hard and question 'why the heck you began this in the first place'. If it's worth doing, it's worth doing right. Trading, like hiking, is a journey. It's begins with a single step! Be patient, or as I like to spell it, 'paytient'.
2. Be careful: When we went on the hike, there were various locations where there was a ledge and a huge drop! If someone fell, it wouldn't be a great experience. Many slippery rocks, unsure footing, and a trail you've never been on before gives good reason for caution. A broken leg hurts and so does blowing out your entire account. Risk mitigation in trading is key. If you focus on risk mitigation, know how much you're going to lose and approach trading from a good defensive perspective, you won't get hurt. Feel free to visit this blog to get more insight on risk mitigation.
3. Do it with friends: Hiking by yourself isn't as fun nor as safe. If something happens and there's no one there to help you, it can become a scary situation. Trading with friends truly does increase your probabilities of success and enjoyment of this fun and easily accessible profession.
4. When you are at the top, you aren't finished: In trading I would agree with what you likely just thought. 'What is the top of trading?â€ Well, that's a great question. I would probably define the 'top of trading' as A) having a written trading plan B) having the discipline to follow it C) consistently making money and D) having a community of traders you interact with to help others and continuously improve. In hiking, the 'top' or the end is just half of your destination. You take pictures, videos, "ooohhh and ahhh" and then turn around and go back to your car. In case you were wondering, here's the video at the end of our 2.7 mile hike at Rainbow Falls. Same with trading. Once you've 'made it' you can always grow, improve, adapt, and help others navigate the rocky trails of the stock market. (Ahh, see what I did there?)
5. Pace yourself: Similar to my first point, but a different perspective. Pacing yourself in trading is very important because if you start out too big, with too much risk you might collapse under pressure. If you have a $30,000 account and you're risking $3,000 per trade, that's too much. Now, keep in mind, risk and investment don't mean the same thing. You can invest $20,000 on a trade, but only risk $600, so if you're wrong on the trade that's all you will lose. $600 is only 2% of a $30,000 account and is much more reasonable in trading. 2.7 miles in hiking is different than 2.7 miles on the treadmill. If you aren't a super active person, I would advise keep your first few hikes under two miles, which is a four mile round trip. That morning we discussed different trailheads. Adam and I were eager about an 11 mile round trip hike. Thankfully, the girls talked us out of it. We were pretty beat after this 5.4 mile round trip hike. 11 miles would have been… an experience for sure.
6. Don't stray from the path: I think this is pretty obvious regarding the hiking analogy. If you stray, you could get hurt or lost. The majority of traders who attempt to use money as a tool go into the markets without a trading plan. A trading plan is like a map for a driver, a play- book for a football coach, ingredients to a cook. It's imperative to have a trading plan! That's how the same traders make money year after year. They have a plan. They know where to buy something, where to sell, how much to risk and why. And â€“ they stick to their plan. IF you trade, have a plan. It's imperative!
7. Enjoy yourself: Hiking really is one of my favorite activites. I had always loved the outdoors, climbing trees, nature, and a sense of seclusion, being away from the noise and one with yourself and your surroundings. Trading should be fun and enjoyable! I love it! Of course, I lose money on trades, but money isn't the focus of my trading. My focus is simply following the trading plan I've created. People trade to make additional income, but if you're stressed out, scared, worried and upset you might be doing something wrong all the time, then you're not having any fun. Remember, it should be like a hike through nature, with the stepping stones being the keyboard, the path, your trading plan and the result, a real life professional trader.
Until next time my friends! Love life, live life and trade it! Jerremy Alexander Newsome