Shark Week has made me realize that us traders are not so different. In some ways traders are like predators and the stock market is like a very elusive and vicious prey that few people can catch. In order to be a successful trader, you have to be at the top of the food chain like a shark. There are 7 major similarities between stock traders and sharks. If you find you are missing any of these traits as a trader, you need to figure out how to develop them ASAP.
1. Cannot Hesitate
How many times have you seen the perfect entry in a stock then the stock took off without you because you hesitated? While we are hunting for profits, sharks are hunting other fish, and they get punished for hesitating also. Sharks are hunting a variety of fast swimming fish and other elusive creatures in the ocean. They cannot hesitate otherwise their pray will escape. When your trading setup comes along you have to feel obligated to take it, without hesitation, because you know that it has a high probability of making you money.
One of my favorite quotes from Warren Buffet about the stock market: “The stock market is a device for transferring money from the impatient to the patient.” Sharks as predators, have to be patient as well to catch their prey. Sometimes a bigger shark will be after the same fish and they have to wait for another fish to come along that doesn’t have competition from a bigger animal. In the stock market patience is the difference between winning and losing traders. Patience to wait for the right setups, patience to get the right entry point, and patience for the right exit.
Timing is everything in the stock market. Entering and exiting the stock at the correct times to make a profit is a crucial skill for all traders. Sharks as predators can only swim fast for short bursts. As a result, they must have good timing to ambush their prey in order to catch them. They have to time it correctly so they do not get caught in a long distance chase they will probably lose. Traders need to learn a system that allows them to time the market. Their system needs to give them an entry before a move in the market is made, and gives them a signal of when to exit for a profit when the market is close to the end of the move.
4. Don’t Need to Eat Every Day
You do not need to trade every day to be a successful trader. Sharks don’t need to eat everyday to sustain themselves. According to animalanswers.com, sharks can go more than a month without eating a meal. Sharks don’t feel the pressure to need to hunt every day, because they know one good meal will sustain them for a while. Trader’s should think like sharks. You do not need to hunt for stocks every day. If you wait for the best setups, the trade will have a high probability of making you money to give you a nice big green month.
5. Quick Decision Making
Day traders have to be making quick decisions throughout the trading day. Sharks as hunters have to be making quick decisions in order to feed themselves. The ability to make quick decisions effectively is the foundation for successful day trading. Even if you are a swing trader or longer term investor, there will be situations in the market when you need to make quick decisions in order to protect your open positions.
6. Always Hunting For Opportunities
While sharks do not eat every day or even every week, they are always looking for vulnerable prey. They wait for prey that is wounded, smell the blood, and then execute. Stock traders are always on the hunt for high quality opportunities as well. We are always checking our scanners throughout the day for a stock with some momentum to pop up. You never know when opportunities in the market will appear, so you always have to be on the hunt for them otherwise you will miss out on an opportunity to make money.
7. Live To Fight Another Day
Most species of sharks are at the top of the food chain and don’t have many predators. However when a hungry shark bigger than them comes around they know it's time to runaway. Just like a shark, a stock trader has to know when to escape danger to keep their account alive. You have to recognize when your trade thesis is invalid, and when it is time to get your capital out of the market. One winning trade will not make your trading career, but one losing trade can end it.
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