Elephant and the Blind men….
You might think that the title of this article is quite funny. But there is a great philosophy we can learn from it.
Let us say if you don’t know anything about football, what do you think you need to know to generate income by playing football ?? Think about the possible answers that strike in your brain before proceeding further.
Let me guess some of your answers. They might be like,
” I should know how to kick the ball in the first place if I want to learn and play the game.”
” I should understand how the opponent reacts so that I can tackle the ball without being snatched by the opponent player.”
“I should know how to take away the ball when the other team possessed it.”
You are not wrong if your answers are like this. But you are missing a very important point here. You must know the rules of the game before you touch the football. If you don’t know the rules, forget about playing, you can’t even understand the game when someone else is playing. Everything looks random if you don’t know the rules. We call this the structure of the game.
If you don’t know the structure, everything looks random.
We will come back to the above point at the end of this article again. Let us continue with the football example to understand some other points.
Well, now you know the rules and let us assume that you know how to kick the ball, i.e. the basics of playing it. Now, what else do you need to win a game? I guess you have guessed it correct. A good team and a good strategy to play the game. Here the team refers to the minimum resources you need to enter into the ground. In trading, a computer, a broker, charting platform, trading platform, internet connection etc. come under the team. You can easily get those resources. The next thing you need is a strategy which was built around the defined structure of the game. The strategy is your road map. Without a strategy, your actions will be chaotic and you will lose sight of your goal.
A pre-planned strategy is a must to remove the chaos of the game when we are in action and to guide us in proper direction so that we don’t lose sight of our primary goal.
Now, you have the structure and a strategy. What else do you need? Now your answers to my first question come. You should know how to defend when you have the ball. You should know how to attack when your opponent has the ball. You should know how to confuse the opponent when he is trying to take away the ball from you. etc…All these things depend on the way your opponent plays when the game is on. You can plan for all these beforehand considering all the possible moves, but you can never say which of those possibilities gonna happen around your strategy in the game. So, you need to use the right moves at the right time. We call these tactics.
If you don’t have tactics, you will become the observer of the opponent. You cannot do anything except watching the opponent win.
So you need a Structure, a Strategy and Tactics to survive and win. No matter what profession you are in, you need these three to succeed. Don’t blindly do the work assigned by your boss just for the sake of a paycheque. Understand the game before playing it so that you won’t be affected psychologically and financially.
Where is the link between the title and the concept again. 😀 Keep reading, you will find it.
You now know that the structure is important before designing the strategy and before practising the tactics. Bring the same concept to trading. What is the structure of the market?
Nobody knows the exact structure of the market. We are like a blind man trying to define the elephant. To make it a bit clear, read the following example which I have read from a book called The Decision Points, written by the owner of the blog, niftynirvana.blogspot.com .
Six blind men encountered an elephant. The first one touched the tail and said that the elephant looks like a thin rope. The second one touched the body of the elephant and said that the elephant looks like a solid wall. The third man touched the trunk and made his assumption. The fourth one felt the legs and said that the elephant looks like cylindrical pillars. The fifth one made his assumption by touching the elephant’s ears. The sixth one, the elephant’s upper back. None of them are correct in defining the elephant.
There was another blind man listening to all these assumptions. He shouted aloud, “I wonder how an elephant looks like !!!!”. The mahout heard this and took him to the elephant. He made the blind man explore the elephant and told him a lot about the animal. Even though there is no way to know exactly how an elephant looked like, he was able to get a good idea, far better than the other six.
We, traders, are like those blind men trying to define the elephant. Here the elephant in the market. Nobody knows the exact structure of the market and no one will. We define the structure with our limited knowledge and experience. If you want to be successful in this business, be like the seventh blind man. Gather the ideas from different sources and form your own Structure, Strategy and Tactics. Trusting solely someone’s words is a losing strategy. Don’t trust the person suggesting you buy a stock or an agent to open an insurance policy which has very good benefits. Even when Warren Buffet says that the market is going to raise, don’t trust him. No one sells ideas for free if they don’t have some benefit out of it. Educate yourself in whatever you want to do for your living and take decisions on your own. I hope I made my point clear. ..
Thanks for reading.