How rock climbers can teach you to make safer gains
Rock climbers are exposed to potential catastrophic falls each time they attempt the next move higher on a cliff. Many retail traders get so focused on trades that are rising they forget to plan for a potentially fatal slip and fall.
Rock climbers use safety anchors to protect their lives from potential deadly falls. These safety anchors allow them to continue to move aggressively higher up the cliff without exposure to excessive risk.
Successful futures traders apply the market’s version of safety anchors to their trades. These safety anchors allow their trades to continue climbing higher while also protecting them from a catastrophic fall. The kind of fall that can sideline your trading career forever…
Failing to use safety anchors in your futures trading causes you to take on a reckless amount of risk. It is risk without need or benefit.
Before we worry about protecting our profits, we need to understand where the profits are going to come from in the first place. Like a good climber, trending markets climb relentlessly in one direction.
What creates trend trading opportunities In the market?
Trending markets provide one of the best opportunities for traders to make consistent profits. Trades can be opened and allowed to just climb higher (or lower) right along with the market.
Market price momentum is a very powerful force and sustained momentum is an excellent identifier of institutional bullishness. This type of momentum can begin to feed on itself as more traders notice the sustained move and drive prices even higher.
Greed makes traders do funny things that often make no sense in hindsight. Experienced traders know that prices can move in one direction far longer than most would ever expect. But, just like a rock climber, every good trader wants their profits to climb as high as possible.
How do retail traders find them?
Asset price trends in the futures market are easy to find. Virtually any trading software or financial website will provide price charts that allow traders to quickly spot them.
Most software will display several different types of price charts and any of them will clearly show price trends.
Once a trend is identified, a trend line can be drawn along the pullbacks to spot the key support levels. These are important points for traders as no asset moves in one direction forever.
As the market climbs higher these key points display that the trend remains in place.
How do you use safety anchors on your trades?
Any experienced climber can tell you the higher you go, the greater the risk if you fall. Any experienced trader can also tell you how quickly your account can fall if you lose your grip on a trade.
Properly placed safety anchors for rock climbers and traders can save both lives and trading accounts.
Without the right safety equipment in place, rock climbing and trend trading can both be extremely hazardous to your health. Rock climbers use safety anchors attached to the rocks to protect themselves. They run a line through the eye of an anchor that limits the distance they can possibly fall.
Futures traders can use the same sort of safety anchors to protect their trading accounts from deadly falls. The only difference is that they are called trailing stops. A trailing stop simply follows the trend line until the trend changes and breaches the stop. Just like a climber’s safety anchor in the rocks, the trailing stop limits the danger to which your account will fall. It allows your profits to continue climbing higher but protects you from deadly falls.
Successful rock climbers always put safety first — it’s the only way they survive. It is also the only way you will survive as a retail trader in the market as well.
We all fall — The key is doing it safely
In rock climbing and futures trading, everyone falls here and there. If you don’t, then you aren’t pushing your ability and maximizing your profits.
You have to be careful not to let fear of a fall turn into a lack of progress or profits. Anchor systems can mitigate the fear in rock climbing. Using trailing stops will perform the same function for your futures trading.
When you apply the proper safety systems to your trades, you can reach for the profit summit without fear. Retail traders will find that the view from just below the summit is just as good as the view from the top.
The best part is that you can climb aggressively and not have to worry about a deadly fall.