Why Day Trading is like Crab Fishing in the Bering Sea
The Top 4 Reasons Trading is like Fishing in the Bering Sea
1) Sometimes despite all your efforts, you come up empty!
2) Sometimes you take a big risk knowing you’ll either be a hero or a zero
3) Mechanical and Technical Failures are part of the job
4) There are forces out of our control including slow seasons, slow trading.
As you all know, I’m a full time day trader, but what you may not know, is that I’m a reality show enthusiast. I spend my evenings watching reality TV and working on my laptop. I’m currently working my way through the Deadliest Catch 12! As I watch, I cant help draw some comparisons between day trading and crab fishing.
Dramamine and Pony Tails
It’s true that I don’t need Dramamine to come to work and the only time I get hurt is when I pinch my pony tail in my headphones. What does remind me of fishing is the need for a “take things in stride” mentality. How many of us have put in a full 8hr day only to walk away from the market with thousands less than we started? I’ve personally lost tens of thousands of dollars on my worst days. On these bad days while I’m watching the fishermen pull in empty pots after spending thousands of dollars on bait and fuel, I feel a sort of kinship. We both put in everything we could, and came up empty. It’s not always of any fault of our own. Sometimes you take all the trades you strategy says you should take, or you set your pots where you’ve experienced great fishing in the past, but it just doesn’t work. You tell yourself “Hey, I’m still the guy that had that big one last week”, but you can’t help but feel you’re only as good as your last trade. There is always that pressure to continue to deliver. The question is how do you harness that pressure to be motivation instead of stress?
Taking the Risk
Good fishing can tempt even the most experienced fishermen to take risk, just as the market can draw traders into high risk positions. It’s always exciting to see the fishermen setting their pots within a few miles of the ice pack. They know the ice is moving south, but do they know they can load the boat with crab if they set back on the hot fishing grounds. Do they set back and let it ride or stack the pots on the boat and move to safer grounds? Let it ride!!! How many times have you been in a momentum trade scalping the high of day breaks higher and higher, knowing you are tempting fate? Whether you are fishing along the ice pack or trading a stock like $PRGN that is up 1000% in 1 day, there are many times when then temptation to take a risk is overpowering. The harsh reality is that in both fishing, and trading, a momentary lapse in judgement can threaten your entire career. Losing a string of 100 pots could easily set a fisherman back $100,000, just like shorting $KBIO can set a trader back $100k in almost no time at all! It’s important to know when to be aggressive, but always keep the big picture in mind. You never want to make a decision that has the power to ruin your year, or even worse, your career.
The Joys and Burdens of Being Self Employed
Trading is hard enough without losing the internet in the middle of a trade, or turning on your system in the morning to find a dead monitor. Being self employed, whether it’s as a fishermen, a day trader, or anything else, is a tremendous privilege. We are our own bosses, and there is so much freedom in that. Its a big reason so many of us are trading from home instead of working for a bank. With all the advantages of being your own boss also come the burdens of making sure you can give yourself a paycheck at the end of the week! There will be weeks you make 10x more you would have made in an office, and other weeks where you actually lose money. When I take a $1500 loss day trading it can be a bit frustrating. On the Deadliest Catch, I watch these fishmen leave the harbor after paying repair bills of tens of thousands, and sometimes hundreds of thousands of dollars. It’s simply the cost of doing business. They have made a great business fishing for crab and they simply budget for repairs. Likewise, we must budget for losses. Over the course of a month a good trader might expect $20k in profits, $4k in losses, and $1k in commissions, for a net profit of $15k (in this month I made $10k, paid $2500 in commissions, and had less than $500 in losses). When you put it into perspective, our losses, minor equipment repairs, are simply the cost of doing business as a Day Trader. They may not be something we look forward to, but the aren’t something we should fear.
The Bering Sea is unforgiving, and so is the Stock Market!
The hardest thing for new traders to understand is the concept that losses are okay. This is no different with fishing. It’s not about counting each loss or each mistake, it’s about knowing in total, you can produce excellent numbers despite coming up empty 20% of the time. With trading, you can come up empty 40% of the time and still be very successful. So each time you fall short, you just have to figure this is paying your dues for the next big winner. Unfortunately, many traders have an emotional response to loss. How many of you have doubled down on a bad position? If you just picked up 20 crab pots in your string and they are all empty, would you set them back? Of course not! You cut your losses, stack them on the boat, and move to better fishing grounds. But as traders we often have this tendency to ignore the obvious and fight against the loss. Fighting the market, just like fighting the ocean, is a battle you can’t win! Learning to take your punches quickly and move on to the next opportunity will be the turning point in your career as a new trader. Sometime the next best opportunity for a big winner will be tomorrow morning. That means having both the presence of mind, and the patience, to close today in the red and sit on your hands and wait.
Failures are part of the process! Take it in Stride!
If you are fortunate enough to have grown into a profitable trader, make sure you don’t spend your time sweating the small stuff! You have generated profits in an industry with a 10% success rate. When we did a survey of our students we found 80% are profitably trading the markets, making them 8x more likely to succeed than the average trader. Despite there success, each one of them knows the humbling experience of taking a big loss. Trading is a career where one month you can make 1 years salary, and the next month you make nothing. This is no different from crab fishing on the Bering Sea. I know it’s easy to fall into tunnel vision as a trader but try to remind yourself to step back and look at the bigger picture. If every day was $3k-5k profit everyone would be day trading. Success requires a take it in stride mentality, some days you make $1k, other days you lose $1k, as long as you are making more than you lose over the course of months and years, you are successful. You can’t get bent out of shape when you come up short, just think of it as the cost of doing business. Having the right attitude is a critical component to successful trading. To read more about it, check out my reading list here.