Hola amigos! 

In the last few blogs I spent some time reviewing the current market situation and how to trade with it. I also shared the “Cold-Shower Effect” concept that I learnt a few years ago, and as always we reviewed the picks from both the Clean and Dirty lists. We also talked about Environmental Education and how changing our daily habits can have a huge impact. This week, my friends, we will close the computer and pick up the shovel, as we’re going back to the garden!  

This week I am working to make the garden grow, while harvesting some kales, basil and a few other herbs. And watched my tomatoes grow. I also had some cucumbers and squash growing nicely, but the storm ruined them…I’ll talk more about it later in the blog. I am now building a nice wooden rised–bed from a kit I bought online some time ago, and soon will fill that puppy with a mix of soil and fertilizers. In the meantime I planted some seeds in little pots, to be transplanted into the rised-bed in about two weeks from now. The plan is to have, hopefully by Christmas, plenty of tomatoes, carrots, kale and squash to cook a feast at home. That’s the goal. I will soon share some pictures and videos of how my roof-top looks like, compared with the very first blog. But all that, next week…today I want to talk about a revelation I just had: I realized that Trading and Gardening are the exact same thing. 

If you read this blog you’ve probably seen me saying “Gardening is pretty much like Trading” like a trizillion times. But the more I practice both of them the more similarities I find, so I came to the conclusion that as a matter of fact, Gardening is EXACTLY like Trading. Not similar, but the same. If we list the different steps a trader/gardener goes through in the process of mastering this activity and becoming profitable, they are all the same! The learning-curve, roadblocks, pain and satisfactions are very similar. You don’t believe me? Let’s see then… 

Step #1 of the process: “Education” 

If you try to build a garden, or trade the financial markets, by only watching a 3-hs youtube video…well, good luck. You won’t eat tomatoes nor make any money in the long run. First step is understanding what are you dealing with, the basics: Gardens, veggies, weather, water, sun…or market, strategies, tools, accounts, etc. Once we get the basics, we jump into the rules. Rules for planting Kale are not much different than the rules for trading let’s say naked puts. Check it out… 

Theta rule: 30-45 days actually for both a covered call and a kale seed to mature.  

Position size: For the naked put, you will divide your account size by the risk you are willing to take, and that will give you the max amount of contracts you can sell. For Kale, you will divide your pot size by the required spacing between seeds/rows, and that will define the size of your round. 2” between seeds, 6-8” once they start growing, and 10” between rows. 

Delta: For trading, you want a 0, +1. For Kale, the weather will be your market so you need to ensure the right temperature is in the required range. 

Place the trade, let it play and collect profits. Then rinse and repeat…same thing with the kale. 

Step #2 of the process: “Hands-on” 

This is the most exciting moment of a trader/gardener, let’s get our feet wet. We place the first trade and watch it do nothing for 30 days. Very anxiously, we look at it every day…it moves $2 up and you think you are rich now and you were born for this. It moves $2 down and you think you are broke and you won’t be able to pay the rent. Yes, emotions all over the place with the first trade. No difference with gardening…first seed I planted I would literally look at it every day. “It’s a plant, Franco…please leave it alone, let it grow” my wife would say. And then the first little green spot would flourish and I literally felt like I gave birth. So much happiness…For the following 30 days I made sure there was enough light but not too much sun, gently watered it, kept the dog far…it was like intensive care for Kales. 

Then as you do it over and over, you mature and learn how to control your emotions. In both cases. 

Step #3 of the process: “Getting some results, building the confidence” 

When things go good we naturally become over-confidents. We just can’t help, it happens in anything else not only in trading. When you see results you allow yourself to take bigger risks, especially when you make money in your first few trades. Then suddenly decide to sell 3 contracts instead of 1, and make some money again. And by the time you realize, you are overleveraging yourself and position size way bigger that what your own rules (Step #1) define. This, unfortunately, happens to most of us and it’s very dangerous and doing this in your rookie years can be a killer, since you probably don’t have a big account, and you don’t know everything you need to know. Something similar happens with gardening, and getting good initial results is actually much easier than in trading…let’s be honest, you have to be really bad not to grow something in a pot indoors. So when you see it growing, you plant 50 seeds at the same time the following week. Easy…right? 

When things are going good, then s$*#t happens. And believe me, we all have gone through the next step. 

Step #4 of the process: “And one day the Market, and the Garden, makes you humble…”  

My first trading year I lost 20% of my account in only two loosing trades. This is my first year gardening, and I lost 100% of the squash and cucumbers, and a few of my tomatoes…with only one storm. And also half of my basil, with only one caterpillar. Yep, pretty sad. Why? well, I was overconfident and a bit lucky at the beginning and I ignored, or broke (or both) some of the fundamental rules. I went big without knowing everything I needed to know, without a bullet-proof plan, without knowing how to HEDGE.  

Hedging is, right after position size, the most important skill you need to learn to be a good trader or gardener. Without it, rest assured that sooner or later you will lose. For hedging your trades, there are plenty of videos and blogs in Tackle Trading. For hedging your garden, I will write something detailed in the future. 

Step #5 of the process: “Go back to Step #1…but now seriously” 

Now you lost money, you lost plants, and it’s time to go back to square one. Sit down, grab a piece of paper and a pen and define a PLAN. Identify exactly what you did wrong the first time and why you lost more than what you expected, and correct it. If you don’t know how to, ask for help…we are a big community willing to help each other so make sure you do it right this time. 

See, Trading and Gardening are the same thing, I told ya. Now that you know, I will share with you a little secret…If you happen to do both at the same time, you will become better at both of them. You will see and learn things while trading that conceptually apply to gardening, and vice-versa. Both will help you get to know yourself better, handle your emotions, learn how to survive difficult times and last but not least, the more you do it the more you enjoy it. 

So go place some trades and plant some seeds this week…and share some feedback with me!  

Cheers, 

Franco.