Tuesday, 26 April 2016

What Can Scuba Diving Teach You About Trading?


Reading Time - 4 Minutes



I have been studying for my PADI Open Water certification for the past couple of weeks. I didn’t think learning to Scuba Dive would in any way relate to trading! However, one glaring similarity I found was to do with habit formation.

We already know that emotional trading can be your worst enemy as a trader. It can take a sound trading plan, crumple it up and throw it in the bin, right next to your trading account.

So when reading the textbook provided before my scuba course, I was pleased to see a very simple explanation of the best way to avoid running out of air and dying, allowing your lungs to over expand so you… end up dying (why am I doing this again?) For me it strikes a cord for one of the main concepts of doing anything the correct way and is exactly what professionals do. I had never seen it written down in such a simple manner.

‘When in times of stress of panic, you tend to do what you are used to doing.’

As simple as that. One short sentence that sums up the reason why you need to focus on building your trading discipline as soon as you begin trading – not when you have a larger account; not when you make back that last loss; and not after you just scalp a few last points from the market.

We tend to return to well ingrained habits in times of stress or panic. Think about any professional and how they train. Repetition. And repetition of doing things a very particular way, leaving you in no doubt as to the correct way forward. Soldiers do it. Footballers do it. Public speakers do it. Surgeons do it. Fire fighters do it.

We switch to auto-pilot when the going gets tough. So our auto-pilot needs to be programmed to do the correct thing. If you allow yourself to make mistakes and jump in and out of the market at a whim, that is exactly what you’re going to keep on doing. Then, when you lose a huge portion of your account you’ll be sitting there thinking ‘why did I do that?’

So build good, solid trading habits. Give yourself every opportunity to do the correct thing when the market throws you a little drawdown.

I hope you all have a great trading week! 




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