The Similarities Between Trading and Farming: A Simple Analogy
- John Lee
- August 19th, 2010
I wrote this article on April 18, 2009. It’s been well over a year and I know that many new folks have never seen it before. During this month, I’ll do re-postings of my best educational content because new folks who barely know me never got the chance to read my past posts from 2008/2009. It’s also nice for me to edit the articles to make them slightly better, otherwise known as ’2nd edition posts’. If you read my archives, then it’s simply nice to have a refresher once in a while. I do hope the re-print articles help in some way.
———————————————————————————————————————————
When I was a kid, I would help my mom garden by plowing the ground, planting the seeds, and watering the plants each summer. We planted all sorts of vegetables and fruits, such as lettuce, strawberries, carrots, melons, radish, tomatoes, eggplants, cucumbers, and many others. We even had a large row of apple trees, which would have provided 100% all natural apple juice if it weren’t for all the bugs getting of them first. It was tough work, but in the end, we all got to enjoy the fruits of our labor.
Trading is a lot like farming (or gardening for suburban folk, but I’ll stick with farming here), especially with my style of swing trading. Every stock you buy (or short) is a seed which you are planting in the ground. Now, before you plant anything in ground, you have to make sure the weather and season favors any such plantings. You have to make sure the ground is soft, moist, and fertilized. You also should have a fence around your garden to protect your plants from animals and neighborhood kids.
You toil endlessly, day after day, making sure the ground is prepared to plant your seeds. Every stock that you buy (or short) is the seed of a plant that you are hoping will provide you with sustenance. You make sure the seed is deep enough into the ground, but not too deep, so that it will have the chance to grow. You watch over your garden each day.
As the days go on, you may notice some weeds. You must remove the weeds or they will rob the soil of the nutrients that your germinating seeds require. As your baby plants poke their heads out from the ground, they will require sunlight to activate the process known as photosynthesis. However, if you do not remove these weeds, they will grow tall and block out the sunlight. Remove these unwanted weeds from your garden, or they will kill your plants. Some of your plants will not make it, so pluck them out early so the others have a better chance.
Now, some people are very impatient and expect their plants to grow up in one day to be harvested. Ridiculous, who taught you that nonsense? Does make any sense to pick a seedling? No. Give your baby plants time to show you what they could become. It might seem really exciting to see them start to grow, but if you pick them now, you will never realize their full potential. You kill your plants the moment you pick them. Some plants need time, so give it to them.
You’ll also notice that not all days are sunny and clear. You’ll have days like this:
or this:
But, do not fear. You are the farmer and you are watching over your plants every single day. If the rain and winds are strong, you can protect your plants. Again, some plants will die because nature is not always nice. Cut your losses and give the others a fighting chance.
One day, you may notice a nosy deer walking. He likes what he sees. The deer may look pretty and gentle, but as a farmer, you know what kind of destruction that deer can bring. Good thing you have a fence, but sometimes, the deer will fight to get in. You’ll just have to scare him off (or shoot him). There will always be creatures trying to kill your garden. It is your job to watch over and protect it. The fence is there to act as your defense.
Towards the end of summer, your farm is lush with life. It practically looks like a jungle full of colorful vegetables and fruits. It is time to harvest. If you do not harvest now, you will let the bugs eat up everything. You can spray pesticide as often as you’d like, but your veggies and fruits won’t stay forever. They will fall to the ground and rot. It is time to harvest, so do it now. Don’t lose all of your strawberries for no good reason.
A great thing about fruits and veggies is not only are they delicious to enjoy, but they provide you with even more seeds than you previously had. You may even be able to double the size of your land in time for the next season. If you just eat up all of your fruits and veggies right now, then you will not have any seeds left. You have become greedy and wasteful.
Save the seeds and grow your farm.
No comments:
Post a Comment