10 trading lessons from a nerve-jangling skatepark session
Happy New Year, traders!
It only seems two minutes since I was wrapping presents and fighting to install the Christmas tree at an approximately vertical angle, yet here we are again with the markets fully open and back to business as usual.
We had quite an active Christmas at our house this year. It was all outdoor toys on the children’s letters to Father Christmas, which I was glad about to be honest.
Anything that gets them out in the fresh air and moving around rather than permanently hooked-up to a computer game is fine by me!
And top of the boys’ lists this year were ‘stunt scooters’.
Now, about two months ago I heard about an indoor skatepark tucked away on a rural business park not far from where we live. I took my boys down there one Saturday morning with the little fold-up scooters they’ve had for a while, but we were met with a shake of the head when I tried to pay to go in.
It turns out the fold-up scooters aren’t allowed on the ramps (too many cases of them inadvertently folding just as the poor rider launches himself from the top lip of a half-pipe ramp, apparently).
And of course the officially endorsed heavy-duty ‘stunt scooters’ cost an arm and a leg. But what a great idea for Christmas presents! Especially after we’d watched some of the other children zipping around, defying the laws of gravity and then going through the whole ‘Can we have one of those, Dad? Can we, can we?’ ritual.
So once the wrapping paper was torn off on Christmas morning the two boys were itching to head back to the ramps as soon as possible.
Now I don’t know if you’ve ever seen one of these indoor skateparks, but they are pretty impressive places. The one we go to is an entire industrial unit kitted out with massive plywood ramps and obstacles as far as the eye can see.
Drop a whole bunch of kids in there – young and old – on an assortment of self-propelled vehicles and it reminded of a colony of ants at work. They all seemed to be intuitively aware of who else was on the move, and from which direction: high-speed collisions were always avoided at the last minute with a casual flick of the handlebars.
That is, until my two eager charges entered the fray.
To be fair, they didn’t cause any actual crashes, but their lack of awareness certainly kept the other riders on their toes.
I’ve promised to take them again on Saturday morning, but only on the understanding they learn the unspoken rules of the skatepark (I don’t think my nerves would take it otherwise).
And of course, once I sat them down to have a ‘quiet word’, the things I had in mind made perfect sense in a trading context too!
So let me share them with you…
10 trading lessons direct from the skatepark
1) Learn the flow
Instead of going hell-for-leather straight into the thick of the action, take a few minutes to simply watch and observe the natural flow of traffic.
At the skatepark there’ll be a popular route around the ramps that riders tend to follow – best not to ride against that flow – and in the markets at any given time there’ll be a flow of buying and selling pressure, with certain prices areas acting as important reference points.
Take the time to watch and identify the current order flow and it can keep you from battling against the tide.
2) Enter with care
Look both ways before jumping in. Even crossing from one part of the skatepark to another can be treacherous to the uninitiated. Make sure you are aware of what’s going on around you and who is moving at what speed and in which direction.
In the markets, before pulling the trigger on a trade, make sure you take similar precautions: check to make sure there are no pending market-moving economic data releases that may impact your trade in an unexpected way.
Make sure you know which markets are moving in which direction and at what speed. Don’t fight the momentum of an established trend!
3) Wait… ready… GO!
When it’s your turn, go! Don’t hesitate or act uncertain: it creates confusion among the other skaters and that’s when accidents can happen.
When a trade ticks all your boxes, pull the trigger! Don’t hesitate or second-guess your signals, it’s what destroys the integrity of a systematic trading approach.
4) Narrow and deep, not wide and shallow
If you want to get good at a certain skating trick, or nail a particular riding-line on the ramp, go narrow and deep: focus on that one objective until you chip away and conquer it.
When it comes to trading, don’t expect to master an entire portfolio of analysis techniques all at once. Take them one step at a time: master the real-time identification of ONE candlestick pattern, or ONE method of exiting your trades. Mastery comes one piece at a time.
5) Accept the bumps and bruises
Don’t expect to ride the ramps like a pro skater from day one. Expect bruised knees and bashed elbows – it’s all part of the learning curve. In trading, it never ceases to amaze me how beginners expect to dive straight into the financial markets and compete with professional traders without first going through a period of ‘education’.
Expect there to be a few mistakes along the way. That way you’ll take the knocks and scrapes in your stride and find them much easier to handle when they do happen.
6) Don’t be greedy
No one likes the kid that doesn’t wait his turn and hogs the ramps. It’s only a matter of time before he is shown the error of his ways by the big boys!
Being greedy with your trading almost certainly will end in a similar way. The market will soon mete out punishment to traders who fail to wait for genuine high-probability opportunities on a regular basis, or milk their trades way past the optimum exit point.
7) Know your place
Respect your current level of knowledge and ability. Gently pushing yourself towards the next level is the way to make progress, but it’s a fine line between that and overstretching yourself.
Don’t risk an accident or a confidence-bashing crash by biting off more than you can chew. It’s just as relevant at the skate park as it is in the markets.
8) Don’t sit in the way of oncoming traffic
‘This looks like a nice place to watch from’, I mistakenly thought as I plonked myself down on the top of a ramp. I then had the humiliating experience of being called-out by a feisty 8-year-old girl on a BMX bike for sitting smack in the way of her next trick.
Lesson learnt: don’t risk your safety by sitting in the way of oncoming traffic. With your trades, don’t be too casual about leaving positions sitting open longer than you should, or failing to tighten stop-losses when you have the opportunity. You never know when an unexpected rush of traffic might hit you from the other direction and adversely affect your results
9) Laugh-off your mistakes
I’m trying to teach my boys not to take things too seriously, i.e. don’t have a big tantrum if you fall-off, get something wrong, or generally make yourself look silly.
Pick yourself up and try again, and have a good laugh about it. With trading, always keep your trades small enough that you can laugh about mistakes made. It really is the best therapy.
Take things too seriously and you’ll put a huge amount of psychological pressure on yourself to achieve perfection. And that can cause all sorts of problems.
10) Think about your timing
Saturday afternoons are NOT the best time to go scootering if you’re a complete beginner. You’ll be competing for ramp space with a whole horde of experienced riders. It is a great time to watch and learn though!
Think about the timing of your trading sessions in a similar way: are there times when you would be better standing aside to simply watch and learn, rather than getting yourself all chopped-up by busy and volatile markets?
Be Prepared: Market Moving Data Coming This Week (London Time)
Wednesday 6th January
09:30 GBP Services PMI
13:15 USD Non-farm employment change
15:00 USD ISM non-manufacturing PMI
19:00 USD Fed meeting minutes
Thursday 7th January
– no big reports
Friday 8th January
13:30 USD Employment numbers
Monday 11th January
– no big reports
Tuesday 12th January
09:30 GBP Manufacturing production
It’s the big one on Friday: US job numbers. Keep your wits about you if you’re in the markets at that time. Trade safely and I’ll catch you again next Tuesday.