What do your pain tolerance and stock trading have in common?

This trading tip occurred to me while observing our team climbing Mount Kilimanjaro. Each person had quite different tolerance to pain and goals about how they wanted to climb the mountain. There is a strong stock market analogy which is one of the most important stock trading lessons to learn – Watch the video to find out more…

Video Transcript

We’ve got an amazing team climbing this mountain. There’s 21 climbers and four guides and a whole bunch of porters. Just reflecting on all of the different people in the team, everyone has their own approach to climbing the mountain. One of the things that I’m observing is different people can cope and tolerate different types of terrain and different bits of the journey. Some better than others, but everyone has their times when they’re performing well, and everyone has their times when they’re struggling just a little bit, and it was a really interesting journey to observe how people cope and adapt to the environment.

One of the lessons or learnings that occurred to me when I’m watching everyone, is that you need to understand your own tolerance to challenge, to loss, to drawdown in particular in the markets.

Some people are comfortable with dealing with a lot of pain…

Some people are only comfortable with a little bit of pain…

In the markets pain translates to drawdowns. So what we need to do as traders is really understand what our tolerance is. Understand how much drawdown we can cope with, how quickly we want to grow and make sure that we adapt to our approach and our position sizing our risk management accordingly.

By doing that, we make sure that our journey in the trading world, just like our journey up this mountain, really fits us and it’s going to work for us in the long run so that we don’t get puffed out, we don’t end up with altitude sickness, we don’t end up breaking our bodies or our accounts in the market.

That’s what it takes to be successful, really, understand your own objectives, your own requirements particularly with respect to drawdown. To make sure you always stay within your own boundaries, your own tolerances so that you can be comfortable and you can just keep going, just keep going.

That’s what it takes to succeed, to get to the summit, which is way back there behind the clouds. Just keep going, follow the process. Make sure you stay within our boundaries, you know, don’t push our bodies too far, and just keep going one step at a time. Make sure we rest when our bodies need to.

In the markets it’s exactly the same, approaching them in a way that suits our own personality and with the level of pain or drawdown managed and controlled to stay within our boundaries.

If you do that, you can make the summit, and you can make the summit in the markets!

That’s all for this video, see you in the next one.