Have you ever been walking down a sidewalk or a street on a crisp fall day and seen a really crunchy looking leaf lying on the ground?
Admit it, you wanna step on that leaf!
We all do it. It’s like some weird addiction. When you see a crunchy looking leaf, a pinecone, a collection of branches, you have to step on it. We live for the crunch! It’s so satisfying! It’s kinda like scraping the bottom of your ice cream bowl to make sure you got all the chocolate-syrup-melted-ice-cream-mixture out of it, or sopping up the runny, yellow goodness of sunny-side-up eggs with your toast at breakfast. We go out of our way to do these things because they’re satisfying to us.
There is a path near my apartment that leads to a nearby grocery store:
Sometimes in the morning I walk down the path before the market opens to grab some breakfast from the store or just to get outside and get some fresh air and get my blood flowing. One day as I walked the path it struck me that there were a lot of crunchy looking leaves around. I went out of my way to step on them all. Every single one. I probably looked like an escaped mental patient to passersby, but I crunched a lot of leaves that day. When I returned home I realized that I had twisted my ankle.
As an overall experience, my leaf-crunching escapade was not nearly as satisfying when I went out of my way to step on every single leaf as when I just happened to come across one really big, dried up, crunchy leaf randomly and step on it because it was already in my path. When I went out of my way to step on every leaf my trip took a little longer, I injured my ankle, I had to shorten some steps and lengthen others in order to hit the leaves, and most of the crunches were sub-par anyway. It even seemed that I became bored with leaf-crunching by the end of the trip (the horror!) As silly as it sounds, it suddenly dawned on me that this is a striking metaphor for the stock market.
Crunchy leaves are our trading opportunities.
Each day as we walk down the path of the market, there are only so many crunchy leaves on the path. Many will look really crunchy, but when you step on them you’ll find they have deceived you. They were actually wet and didn’t crunch at all. Others you will have to go out of your way to step on, stretching your legs into uncomfortably large or short strides and making yourself look like a fool in the process. Sometimes it will rain and every leaf, stick and pine cone on the sidewalk will be sopping wet and not worth stepping on, and you’ll have to wait for the sun to come out again and dry them up. I can also guarantee that in going out of your way to step on every leaf you think will be crunchy, eventually you’ll miss an opportunity to step on that one leaf which would have been really, really crunchy. Instead of trying to step on every leaf, I realized that it is better to take the opportunities that arise within the path I’m already on and the stride I’m already in. The sidewalk will be there tomorrow, and there will always be another leaf.
Now, when I walk down the sidewalk I keep my eyes peeled for the really crunchy ones. You know, these ones:
I know the others are there. I want to step on them, but I know that if I try too hard I might miss an opportunity to step on a really good one. If I walk the entire path and no crunchy leaves happen to be in the area directly under my foot while I’m still in my normal stride, I know that I can come back the next day and the path will still be there. There might be another crunchy leaf on another day. Even if I go an entire week without finding a single crunchy leaf, a single gust of wind could blow through at any time and litter the path with new opportunities.
In the stock market, especially as new traders, it is extremely tempting to take every single trade and always be in a position at all times. We feel like we’re missing out if we don’t take every trade or if others are making money and we’re not. The truth is that sometimes the market just does not provide you with any opportunities.
You cannot create a trade out of nothing.
Accept this and you will become a more profitable and more controlled trader. If there is no setup, no momentum, no volume, no reason to buy or sell, then wait for another opportunity. Eventually the market will give you a leaf that you just know is going to crunch so loud your followers will be jealous that you already stepped on it. Wait for the really crunchy leaves. When you do, you’ll find that your overall walk through the market is more satisfying, less stressful and more profitable.