Evolution. Markets emerge, then evolve. New products and securities emerge and evolve. New traders emerge. Old traders resurface. Both need to evolve.
The first step toward evolution is self-discovery. If you can't be open and honest with yourself, you have no chance as an investor or trader.
If you spent any of your youth watching Fantasy Island, then you are already aware that this path is fraught with doubts. And if this is something that you are struggling with, then reading all the blogs in the world or following hundreds of traders on Twitter will not make you a better trader. Not even one written and tweeted by Mr. Roarke. Why? No matter their track record, no matter how experienced they are, no matter how eloquent their words, they will make mistakes. No one can be right all the time.
The true test of a trader is how they react when they are wrong. I hate being wrong, but it is going to happen. Even Tattoo missed announcing a plane's arrival at times, although like many writers, these "misses" were somehow never acknowledged. Traders make incorrect market calls. You cannot evolve away from being wrong; however, you can create strategies that lessen the pain when you are wrong. Strategies that keep you in the game and net you money over time. Isn't that everyone's fantasy? "Yeah, I was bullish on that stock, but the thing just tanked, and I made a nice profit."
If this sounds like science-fiction, or a fantasy, take a look at my play on Yirendai (YRD) in early November. I was net dead wrong with a bullish sentiment, yet the trade did offer an opportunity to make some fast coin, and the underlying put position married to the stock permitted me to hold into earnings, trade after hours for a gain, and offer potential upside if the stock had continued its downward trajectory. That is the way I play the game.
These strategies may look complex, yet each piece has a specific purpose. Still, sometimes it doesn't matter if a position is simple or complex. It can still be wrong. I've had my fair share. I'm still long a trade in the iShares 20+ Year Treasury Bond ETF (TLT) from last week.
Not every trade or investment is created with a hedging or protection strategy from the start. All too often, we may find ourselves on the wrong side of a trade, yet not want to exit. Therefore, it is important to learn if it is possible to evolve a losing trade into a break-even or a winning trade via stock or option repair strategies. This is by far the most fluid part of any portfolio.
Beyond trades, simple or complex, along with adjustment and repair strategies, we continually need to examine modern adaptations of traditional strategies. Evolution in life is not a choice, but survival is. Evolution as a trader is a choice, but you are less likely to survive if you choose not to evolve. In order to evolve, one simply needs to take some time, ask questions and think "outside the box."