Tortoise and Hare story

The Tortoise and Hare

There once was 2 traders, trader A (the Tortoise) and trader B (the Hare).
Both had very different styles in trading, the Hare spun around fast in the market,
often making big calls getting it right almost 90% of the time.
To put it simply the Hare was the better runner/trader.

The turtle on the other hand had a very slow and steady style, he wasnt fast
and didnt make great calls. In fact on the market he was right only about 30% of the time,
so most of the time he was wrong.
The hare showed him everyday that the tortoise just didnt understand the market.
“How could you be wrong almost everyday and still think you know something?”,
the Hare would ask.

The tortoise had to learn to take the humility, he just couldnt run as fast
as the hare or make those calls, but he still kept at it every day.
He learned to put 1 foot ahead of the other every day, by making the same calls everyday,
even though he was losing money most of the time.
But the tortoise understood something, he understood that if he takes 1 step at a time,
eventually he will get to the finish line.

It was difficult for the tortoise, day-in and day-out he had to watch his friend
spin circles around him, his friend was the better trader after all.
And to watch his friend take naps and still sometimes be ahead, was difficult for the tortoise,
who couldnt afford to nap, but also got tired.

What the hare didnt acknowledge was that when he was wrong, or when he went to go take a nap,
it cost him dearly. But the tortoise never took a nap, he just kept plodding forward day-in day-out.

In the end the hare could have been seen to be the better trader but the consistent
nature of the tortoise helped him to win the race.
The losses the hare took cost him more than his winnings.

Here is a breakdown of an example between the tortoise and the hare.
The difference between the two characters in the trading world is that the tortoise
understood 2 things better,
1) Compounding
2) Consistency

Both Traders started with R 100,000 in 2000
These were the results after 20 years.

Year Account Return Account Return
2000 120,000 20% 140,000 40%
2001 138,000 15% 224,000 60%
2002 144,900 5% 67,200 -70%
2003 173,880 20% 94,080 40%
2004 217,350 25% 141,120 50%
2005 260,820 20% 211,680 50%
2006 312,984 20% 148,176 -30%
2007 328,633 5% 266,717 80%
2008 394,360 20% 746,807 180%
2009 453,514 15% 1,120,211 50%
2010 589,568 30% 448,084 -60%
2011 736,960 25% 806,552 80%
2012 994,896 35% 1,048,517 30%
2013 1,193,875 20% 1,572,776 50%
2014 1,432,650 20% 2,830,996 80%
2015 1,790,813 25% 6,228,191 120%
2016 2,148,975 20% 622,819 -90%
2017 2,793,668 30% 871,947 40%
2018 2,933,351 5% 1,307,920 50%
2019 3,520,021 20% 915,544 -30%
2020 4,048,025 15% 1,281,762 40%

It is easy to belief in hindsight that Im different, what happened to the hare wouldnt happen to me,
I would never let my account lose 90% of its value.
It can happen and most likely it will happen if consistency and risk management isnt followed.
What often happens is that when we have good years we believe next year will be even better, because
we have proof that what were doing is right, so often we forget money management or risk management as we are over-confident with our results.

Its also easy to believe that this doesnt happent to market legends.
Jesse Livermore is arguably one of the greatest traders on Wall Street, his calls were incredible,
several times turned a few thousand dollars into a million, however in the end he ended up broke.
After going broke the 5th time he eventually gave up. Often it was really just
one or two bad trades that caused his losses.
So 95% of the time he was making big profits, small profits or small losses,
the 5% was big losses. That 5% of his trades caused him to go broke.

The morale of the story is really, learn to find a consistent edge in the market,
one that doesnt necessarily
double your money every month, just a consistent performer, and trade this edge over and over.
Ignore other peoples opinions, as they are irrelevant, stick to the strategy to your plan.
Over time you will overtake the hare and given more time you will pass him by far.

So ask yourself are focusing on your calls or are you focusing on the execution of your plan?

Blue Chip

Hi, This is BlueChip. Having studied the market for some time I can show how not to trade on the market...its at least one step closer to how to trade on the market

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