Tales of the 3 Donkeys

This one below refers to Stock Traders, but I'm sure you'll agree that it can be applied to FOREX as well...


Ever noticed that the market always goes thru cycles? Just like night and day, the market goes into periods of bull runs followed by bear runs and repeats the same pattern again and again. The events that shape the cycles may be different but the end results are the same.

In the stock market, there are 3 types of donkeys. They are the Young Donkeys, Regular Donkeys and Old Donkeys. The Young Donkeys are the newbies. This is the time when mistakes are made and tuition fees (some are more expensive than others) are paid to the masters.

And who are the masters? Yup, the Old Donkeys! The Old Donkeys take the money from the Young Donkeys in exchange for valuable and sometimes expensive trading experiences in the stock market.

Just like in college, some of these Young Donkeys would rapidly graduate to become Old Donkeys. They learnt quickly from their trading mistakes, developed their own trading system that suits their own unique personality and have solid money & risk management strategies. They also recognized their own strengths & weaknesses in dealing with greed & fear. Greed & Fear are the factors that drive the market.

When trading in the stock market, the goal is to get over the Young Donkeys phase as fast as possible with minimal financial damage. And then, very quickly graduate to become the Old Donkeys.

However, the reality is that many of the Young Donkeys get stuck in that stage, unable to graduate to become the Old Donkeys. As time passes by, the Young Donkeys tragically become the Regular Donkeys without even realizing it.

And when they do (maybe after taking multiple big hits on their wallets), they have already become totally disillusioned with the stock market.

That is probably when they start saying that the stock market is just another form of casino. To the Regular Donkeys, trading stocks is just like gambling.

This is tragic.

Bringing the balance of probability in our favor is what stock trading is all about. It is NOT gambling. It becomes a gamble ONLY when you do not have a solid trading plan.