I built a bird feeder measuring some eight-square feet outside our bedroom window. It is a magnificent view, if you like birds, and we do. Depending on the seed we put into the feeder, we can attract a variety of different birds, and, at any one time, we can watch four or five different species of birds flailing around for seed. The color, stripes, size, beak shape, and aggressiveness of each creates an interesting hodgepodge of movement. Yet, despite all their differences, one bird attacking another is rare. Why aren’t there more fights? Perhaps because each bird has a common goal—to eat seeds—of which there is more than enough to go around, As well, we provide enough variety to satisfy the particular tastes of each species, so in a one sense, each bird finds exactly what it wants to achieve its goal of feeding for the day.
Traders as well have a common goal—to make money—and the “bird feeder” of the trading world provides enough “seed” for each species of trader to find exactly what is needed to satisfy the particular tastes of the particular trader. In other words, “there is more than one way to skin a cat.” Believe it or not, all my animal imagery has a point, and that point comes directly from a question a reader named Steve sent me. In the question, he asked, “How does a new trader reconcile the following edicts: Let your profits run! Take what the market has to offer!”
Like the birds in our feeder, choices exist in the trading world, but unlike the birds in our feeder, traders are human, and this makes decision making much, much, more difficult. You see, it is easy for the birds. They simply “know” what seed they want, and they simply act on that knowledge. There is no discussion, no debate, and, certainly, no hesitation. They see the seed they want, and they eat it. Although this level of action is basic, it is, ironically, the place you want to get to as a trader. You will always have to make decisions about the choices offered, but the more intuition involved, the less overt thinking is necessary. To make this clearer, let’s go back to the birds for a moment.
Each bird in our feeder instinctively knows which seed it likes. After one trades for some long timeframe, he or he develops an instinct about trading. This is what I call intuition. You just know whether to let your profits run or take what the market offers. You know because you have experienced innumerable trading setups, in myriad market conditions, and you have failed or succeeded based on the choices you made. If you are paying attention, after awhile you begin to avoid those choices that hurt you and you take the choices that benefit you. Over many eons, birds have learned this same lesson, and so their choices are thoughtless. They just see what they know and they act accordingly.
Steve, you don’t have to reconcile the two choices because each is applied when it is appropriate to do so. You let your profits run when you “know” you can, and you take what the market offers when you “know” it is time to close out the trade and move on. For experienced traders who utilize intuition, it is a thoughtless choice, most of the time. Successful traders “just see what they know and they act accordingly.” If you view trading in this light, you will be less inclined to decide which choice is “right” and more inclined to apply a choice when the situation calls for that choice. Yes, in the beginning, your choices will fail you more than benefit you, but over time, the ratio will slowly change, and you will find more success than failure in the choices you make. Like the birds in our feeder, you will act according to the situation at hand.
Trade in the day; invest in your life …
