“Surfing’s one of the few sports that you look ahead to see what’s behind.” —Laird Hamilton
I went surfing last weekend. Being from San Diego, it’s probably little surprise I’ve enjoyed this sport for almost 20 years. But I am hardly a pro. As a trader I saw some interesting metaphors and similarities.
SUMMER WAVES AND MARKETS
I surf a 9’6”. So I like waiting for great waves and just cruising. Summer surfing is a lot different than wintertime. Everyone, including their mother and two out of town friends with the worst T shirt tan and incomprehensible Slavic accent you’ve ever heard are in the water and paddling to catch the wave you’re already on. It happens. (Yeah, surfing rules are pretty common sense. If someone else is standing up on a wave that you’re paddling for, don’t paddle for that wave).
During the summer, the waves are smaller and there’s more competition. So, you spend a lot of time working on your tan. But that’s ok, because the water is warmer and it’s nice just lying on the board.
Sound familiar? Summer markets can be quiet and vulnerable to whipsaw moves amid a lack of liquidity.
Winter is different. Water is colder and getting a tan is harder. Mr. Glasgow is back home. Waves are often bigger and much more brutal. I get slammed by overhead waves at beaches where the prior summer I could go hours without getting my hair wet. Once or twice, I’ve even cracked up my board pretty bad.
GETTING STARTED
When learning to surf, I tried to catch anything that remotely resembled a wave. You can imagine, I wiped out a lot with this strategy. Of course, I still wipe out but I generally see it coming way in advance and know its just part of the fun. I’ve been doing this so long, I know which waves I want to ride and which ones aren’t worth my time. Sometimes you miss the perfect wave because you aren’t in the right spot to take it. Sometimes you miss it because someone else is already paddling for it, or maybe you are tired from paddling out and just don’t want to go for it.
Surfing and trading might have more in common that you thought. You need to pick your trades and catch your trends. Trade when you are ready.
YOU DON’T ALWAYS SCORE
Sometimes you paddle for a perfect 8’er, end up missing, nose-diving the board and find yourself lying on your back on the bottom of the ocean wondering how you got there and hoping you can figure out which way up is before you run out of air. When you do, you paddle back out and wait around for the next wave. Sometimes you paddle for the perfect wave and don’t catch it. Sometimes that perfect wave actually sucked and wasn’t worth catching and you’re pissed you wasted all that energy for a crappy ride. Oh, and just as that happens, Mr. Perfect wave’s three big brothers come crashing down on your head in series. And sometimes, you just stall out and miss.
Not all trades are winners.
RIDE THE TREND, BUT RESPECT THE WAVES AND MARKETS
But, there are few better feelings than being nearly alone at the beach in the morning, paddling for a beautiful wave, dropping in, making a perfect bottom turn, and running your hand through the cresting face of the water. You are standing up on your board having the ride of your life. You look up at the top of the wave several feet above and see perfect blue water – a fluid face yet smooth as glass as you run your fingers through. You stand there in awe, riding this wall of water like an eagle catching the wind. You marble at the beauty of nature and this peaceful giant which could snap your board in half if you don’t show the proper respect. That’s when you’re alive.
Sounds familiar huh? The same feeling can emerge in trading. Respect the markets, or else you can get hurt badly.
KNOW WHEN TO PARTICIPATE
Oh yeah, one more thing. Back in high school, every day was a good day at the beach. It didn’t matter what the waves were doing so long as I was in the water. Now, I often look for reasons not to surf. Especially in the winter time, if the waves aren’t great, it isn’t worth putting on a wetsuit and freezing.
Hopefully that sounds familiar too. After all, successful traders need to be picky and follow their set-ups. Don’t trade just for the sake of trading. Trade because your set-up is there and the odds are in your favor.
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[Have you learned lessons about trading from other aspects of your life? Please share a comment below.]
