The old saying about ‘making hay while the sun shines’ applies as much to trading and actively investing in the markets as it does to making hay in the spring time for farmers or other life endeavours, hence the saying. Farmers know that each year in the spring time is the ideal time to make hay and stack it away in haysheds for use in the winter time when pasture growth is slow to non-existent and their stock need additional feed. The seasonal cycles of nature are known and understood even though the conditions for each season are not exactly the same each year.
The farmers have ‘rules’, if you like, for this interaction with the dynamics of nature that are passed on from generation to generation. Their ‘set-up’ is the seeding season and their ‘trigger’ to act is the changing of the season. When the time is right they act. They don’t listen to the stories in the news or ask a broker for a hot tip or give over the decision making processes of haymaking to a fund manager. They use the rules and skills they have acquired as professional managers of their farming business and they act on these. Nor do they leave the pasture growing happily in the paddocks in the ‘hope’ that it will still be there in the winter time. They know that it won’t.
So it is with the markets which also have seasons. Markets are seeded, rise, reach maturity and are harvested. However, there is one major difference – the seasons of the market as not as definitive and timely as the seasons of nature. As managers of our own money we need to have a set of rules which allow us to engage the market with confidence and a feeling of certainty when the conditions indicate we must. We need to get synchronised with the seasons of the market and be able to act decisively when a call to action is triggered and not be concerned with the opinions of others.
This is our opportunity to ‘make hay while the sun shines’. Whilst others are dithering around trying to decide what to do, or listening to the gossip of others, or waiting on the sidelines whilst the market marches ahead, those with a plan of action do not hesitate and engage the market with clarity and decisive action based on the rules of their trading plan and trading system.
And, just as importantly, we need to recognise when the trend season ends. Our job then is to manage the trades and have a full set of rules for harvesting the profitable trades and weeding the losing trades. In this way we avoid the ‘hope’ mentality and get to preserve our capital so we can participate in potential money making opportunities when the conditions are once again conducive to our trading style or methodology.
The way to ensure this occurs is to have technical criteria that are unambiguous. This way you will be able to re-engage the market with confidence. Without knowing when to increase your exposure to the rising market you will be limiting your ability to make hay.
The sun has certainly been shining over the last five months. Have you been making hay?