In many books on trading, we often see the markets associated with the jungle. why not?
Every day traders grapple with animal references such as bulls, bears, hawks, pigeons, wolves and sharks.
Markets can also be unpredictable, unforgiving, and dangerous. To survive and conquer the markets requires knowledge, skills and courage.
This is probably why traders love to refer to themselves as hunters in modern times.
Some say they are like cheetahs that catch their prey at breakneck speed while others see themselves as crocodiles waiting for a big catch.
So what does it take to become a successful hunter? And for traders, what does it take to earn points consistently?
Let’s take a look at the basic steps the best hunters (both animals and humans) take when trying to bring home bacon:
1. Know your prey
When a lion wants to eat a buffalo, it does not attack the first buffalo it sees. Study and analyze herd behavior patterns and look for potential weaknesses.
By the time a lion is ready to attack, it already knows what makes the herd knock, where to attack, and how to get the fattest buffalo with the least amount of effort.
As in the case of Leo, it is essential for traders to collect data before striking.
Before entering a short EUR/USD trade, for example, you should first know what factors can influence price action and which levels offer the best reward-to-risk ratios.
Ask yourself questions like “What economic reports does the pair usually respond to? When does the pair move the most? What factors could change its current direction?”
Collect data and convert it into probabilities.
2. Wait for the best opportunity to strike
Once you have gathered information about your prey, use it to your advantage by exploiting it at the best possible opportunity.
After all, Hunters usually only get one shot. You don’t want to waste all that hunting hunting down the smallest prey, do you?
Maximize your gains while minimizing your effort and risk.
The difference between the average hunter and the skilled hunter is that A good hunter waits until the odds are greatly in his favour.
Don’t miss your chance to pounce on the first possible deal. Be sensitive to the signals of the markets and wait for the trade with the best odds.
3. Execute according to plan
The crocodile does not hesitate to jump out of the water when it is time to catch prey. It’s just the implementation of the plan.
For traders, the time to think about what could happen and what you would do in an alternative scenario is over. At this point, it’s all about just what to do.
Be fast, aggressive, accurate and confident in execution. Don’t let fear and greed get in the way of your performance.
Of course, it would be beneficial if you have already back-tested your trading strategy back and forth and are confident that the numbers will eventually add up.
4. Control and control
On any given day, the Tiger may encounter a highly resilient deer or a similar scenario that may alter the outcome of its attack.
Should Tiger use a different approach? Or cancel her plan and wait for another chance?
As I said above, markets can be volatile and unforgiving.
Just because AUD/USD has always had a bullish reaction to the RBA’s rate hike does not guarantee that it will do so this month. If your actual trading scenario is different from the one you initially imagined, it’s time to make adjustments.
The first step is to refer to your playbook for any alternative strategies you may have written or implemented before. Then, weigh the results of your choices.
Should you cut your losses or let your profits flow? Should you add to your position or close it and wait for another opportunity?
Whatever you decide, remember to choose the path of minimum risk and maximum rewards.
5. Learn and earn
The best hunters are the ones who have learned the most from their previous experiences. In the woods you eat what you kill. The Predator will starve to death if it doesn’t get hurt with every kill.
As in the jungle, the consistently profitable traders are not the ones with the most trades, but the ones who have learned from their experiences and keep improving their skills on every trade.
One way to speed up your learning process is to get involved deliberate practice. Writing down, recording and reviewing your trades turns one experience into many and makes it easy to correct your mistakes.
Survival in the forex jungle does not require expensive tools or a fancy trading course.
Sometimes it only takes simple processes like the above process, repeated day in and day out, to slowly but consistently become profitable.
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