Most of us are familiar with the story of 'The Tortoise and the Rabbit,'
but there are some surprising and insightful parallels that can be drawn
between this famous fable and the world of trading.
The story begins with
a tortoise and a rabbit setting out on a race. The rabbit is of course much
faster, so he zooms off ahead while the tortoise slowly plods along.
There are some
variations of the story but thinking he has plenty of time to spare, the rabbit
stops to enjoy some carrots and take a nap.
Much to the rabbit's
chagrin, the tortoise has been gradually making his way towards the finish
line, overtaking the napping rabbit and winning the race.
A story of consistency
The basic message to
take from this is that consistency and hard work often lead to greater
achievements than physical advantages or privileges of some kind.
This also illustrates
the importance of remaining mindful of "the long game" rather than
focusing solely on potential short-term gains.
So how exactly does
this relate to traders?
Slow and steady wins the race
If you're honest with
yourself you have probably already figured out whether you are a rabbit or a
tortoise when it comes to your trading approach.
A rabbit may typically
rush in with high-frequency trading, over-leveraging their account and
ultimately making decisions that are based on emotion rather than patience.
After a couple of
successful trades, rabbits become overly confident, increasing their risk while
placing too much emphasis on their imagined trading abilities.
This decreased risk
aversion may lead to increased losses, which may end up with rabbits either
spinning their wheels or getting knocked out of the 'race' altogether.
A tortoise, on the
other hand, will remain patient in the face of tempting trades.
This means the
tortoise will adopt a long-term trading strategy with a lower overall frequency
of trades. This also means never over-leveraging his account or doubling up his
risk because of a sudden surge of confidence off the back of a few lucrative
trades.
Channel your inner tortoise
As silly as it might
sound, there is a lot to be learnt from this children's tale.
Consistency coupled
with a clear grasp of long-term thinking may help to greatly preserve your
trading capital.
If you do enjoy a
string of successful trades, don't let this go to your head.
While you may feel
excited and extremely confident, it is still wise to hold fire until you see
obvious trades.
You might feel like
luck is on your side but when this happens, channel your inner tortoise and
your portfolio will thank you in the long term!
Trading is not a
sprint, it is a marathon, so avoid making rash short-term decisions and instead
remember that consistency is the number one factor that will allow you to
gradually increase your capital.
Tortoise trading might
be what will keep you in profit quarter after quarter; year after year!
