Tuesday, March 29, 2016

What The "Shawshank Redemption" Taught Me About Trading

"Geology is the study of pressure and time. That's all it takes really, pressure, and time. That, and a big goddamn poster."
- The Shawshank Redemption


In the Shawshank Redemption, one of my favorite movies, Andy Dufresne spent 20 years of his life tunneling out of Shawshank prison by depositing one pocketful of gravel into the prison yard every day. He quietly and methodically tunneled his way out of his cell using a rock hammer. A giant poster of Rita Hayworth covered up the tunnel entrance in his cell. With patience and persistence, he managed  to reach his goal while nobody else was watching.

There's a lesson to be learned from this movie in trading. It's not necessarily about big winners, rather it's having the patience to stick to a reliable trading plan, and to deposit a pocketful of money into your account every day.


With roughly 252 trading days available every year, if you have a plan that consistently adds $20 per day to your account, you would wind up with an additional $5,040 in your account, less exchange fees. If you put 5% of your account at risk on high probability strategies, that number can actually grow higher, and that's after one year. Of course taxes will come into play, but you're still ahead of the game.

Over the years, as your account grows, this mindset could potentially produce far greater gains. But the basic principle is the same - depositing a handful of gravel in the yard every day.


I'm not going to bother with compounding arithmetic, but the yields associated with this mindset can be far greater than passbook savings, CDs or other low-yielding investment vehicles.

When you trade with Nadex, there are multiple strategies that can offer a $20 maximum reward against $80 risked. The probabilities are very high, and the rules are simple and straightforward. If you trust the probabilities and the setup is there, it can be a relatively stress-free way to trade. 

And another pocketful of gravel is deposited in the yard.



The Purpose of this Blog


The Inquisitive Trader will be used  to share my experiences as an investor getting back into trading the markets. In June 2014 I joined the staff at TradingPub, and I am responsible for helping to book speakers for free webinars. Each week, I am exposed to a wealth of information from leading industry experts who teach how to trade the financial markets. When I come across interesting trading strategies, I will summarize my thoughts and share a link to the archived webinar. As I develop my own trading plan, I will also share some of my personal successes and failures. Responsible comments are welcome, but to avoid flaming posts and spam, I will be moderating all comments. I hope you find this blog useful, and wish you the very best on your journey trading the markets.

Disclaimer

The opinions expressed in this blog are solely those of the author, and should not be construed as trading advice. I am not a registered or certified financial planner. There is a very high degree of risk involved in trading. Past results are not indicative of future returns. All individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein.


7 comments:

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