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Do these to become a "jungle hunter" in the trading market!

Published: Mar 08, 2024
Updated: Mar 08, 2024

The "Adaptive Markets Hypothesis" posits that markets function much like an ecosystem, evolving gradually in a manner akin to the natural world. Consequently, the capital markets also adhere to a "law of the jungle." The hunting techniques of skilled predators in nature can similarly be applied to transactions in the investment market.

Speed Wins

There are many predators in nature that win with speed, with the cheetah being a prime example. After identifying its prey, the cheetah will stealthily approach, and once within an effective killing range, it moves with lightning speed to capture its prey swiftly. The cheetah's greatest advantage in hunting is its exceptional speed, and due to its limited stamina, its body has evolved into a streamlined shape, with even the air in its abdomen compressing to create propulsion while running.

In trading patterns, high-frequency trading is similar to a cheetah hunting for food, winning through speed. Once the computer recognizes a market condition that aligns with the trading philosophy, it immediately and automatically locks onto the target and quickly captures profits. However, just as the cheetah's small size limits it to hunting smaller prey, high-frequency trading is also limited by its characteristic of rapid execution, thus the amount of capital involved in each trade is not substantial.

One Strike, One Kill

The ultimate in motion is stillness; there are predators that win with speed, and there are those that win with patience, with the crocodile being a quintessential example. On the African savannah, during the migration of wildebeest, crossing rivers is inevitable, and they will choose safer spots to do so. At this time, the crocodile quietly floats on the surface of the water, appearing from a distance as nothing more than decaying logs. After patiently waiting for the wildebeest to enter the river one after another, the crocodile will suddenly launch an attack on the one closest, catching it off guard with a deadly strike.

This hunting method is similar to trend trading. The formation of a trend requires a certain amount of time, and traders confirm the establishment of a trend by observing market movements and collecting relevant information. Once a trend is confirmed, traders begin to trade heavily, achieving substantial profits. Although trend trading can yield high profits when the market is correctly anticipated, waiting for the market requires sufficient patience, hence some say that one or two trend trades a year are enough.

Camouflage to Lure Prey

Nature abounds with masters of camouflage and many "fishing" experts. The mata mata turtle is an aquatic turtle with limited swimming ability and slow, clumsy movements. To catch nimble fish, the mata mata turtle opens its mouth wide and extends its pink tongue, which mimics the larvae of a worm that fish love to eat, constantly wriggling. When the greedy fish swims over to savor the delicacy, the mata mata turtle suddenly closes its mouth, swallowing the fish.This method of "setting up a trap" is also quite common in financial derivatives trading, often referred to in the industry as "luring the bulls" or "luring the bears." After the market has been moving smoothly along a trend for a while, it suddenly runs in the opposite direction for several consecutive days, and the range is not small. As a result, a considerable number of traders seem to have found an opportunity for trading and operate in the opposite direction. It is precisely their contrarian trading that helps the "trapping" funds to achieve the goal of obtaining greater profits at a smaller cost.

Gather and annihilate

In nature, there are many solitary hunters, but there are also many species that hunt in groups. Although the tiger is the "king of the mountain," it is difficult to predict the outcome when a tiger encounters a pack of wolves. On the African savannah, the solitary cheetah, limited by its physique, can only hunt antelopes of its own size, but the lion, which hunts in groups, can kill much larger buffaloes.

Similarly, in the investment market, even if an individual trader is very capable, they will be limited by personal cognition, judgment, psychology, physiology, and other factors, and may make mistakes or even fatal errors in certain situations. For a trading team, each person is responsible for research, trading, risk control, and other aspects, working together to discover and quickly make up for any mistakes.

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