Why We Trade

I have met a lot of traders over the years.  Retail traders, prop traders, institutional traders, discretionary traders, all sorts, both in person and via social media.  And one thing that is consistent among them all is that they are mutants.  Not to get too Bill Murray-esque here but there is something very, very wrong with them.  I, of course, count myself in this retardedly beautiful group.

Just our choice of avocation is a huge red flag that should warn those close to us that we may have some latent personality disorders.  Even most postal workers would look at us and say “Man, those guys have issues!”

And why shouldn’t they, after all we didn’t decide to do something brave like being a fireman or police officer.  We didn’t choose a socially respected profession like that of a doctor or a lawyer.  Nor are our endeavors holy and devout like those of the non-pedophilic contingent of the priesthood.

Instead we chose to do something that is so sickly stupid that if it didn’t already exist a team of Hollywood writers couldn’t dream it up.  Something that everybody is fascinated by but nobody really understands.  Something that drives us to curse at our monitors, slam innocent computer mice onto desks, and “Bruce Lee” keyboards over our knees.  Well…..of course not you Mister Shaolin-Monk-Zen-Calm-trader-guy who is reading this and shaking his head in disgust…..but all of the rest of us have.

And the highs and lows associated with trading are epic.  I’ve always wanted to do an experiment where I gathered up a baker’s dozen or so of crack addicts and heroin junkies, brought them onto the trading floor of some large brokerage, and then let them watch for a few hours.  I am totally convinced that if at the end of the day an offer was made to pay for their detox and fund them up with million dollar trading accounts they would say “are you crazy?  I mean I have some highs and lows in my life, but those guys are nuts!  I wouldn’t do that for ten million dollars!  Now give me back my crack pipe and let me return to my relatively normal life.”

In addition, nothing about trading is natural or intuitive.  Our DNA rejects the activity, even when in our purest and most naive state of mind.  I remember my daughter wandering into my office one day during trading hours and innocently inquiring about what I was doing.  It struck me as opportunity to see how someone with a mentally “clean slate,” –free from the biases and preconceived notions that years of watching CNBC, reading 10-Q’s, and listening to analysts brings–would interpret what was happening on the screens.

I showed her the pretty colors of the charts, and the “candles,” and how they moved up and down, changing between red and green as the day went on.

“Which color do we like best daddy?” she said.

“We like green sweetie.  Green is what we want to see.  That’s what will make us money today.”

“Yeah…..!!!  Green…!!!  We like green,” she yelled, exuding the type of joy reserved for those who never have experienced a margin call.

I soon found myself in one of those quintessential daddy-daughter moments, straight out of a Norman Rockwell painting.  Standing there in front of my quad-monitor trading desk we cheered in unison with every tick…

“WE WANT GREEN…!!!  WE WANT GREEN…!!! WE WANT GREEN….!!!”

The trading Gods were kind that day and filled the screens with green.  We celebrated in the style of the ancients by the combining of chocolate with milk.  We danced and sang our pagan victory song, cups help held high in the air, my office chair substituting for the columns of Stonehenge.  And it was good.

The next day she returned to my office, excited and eager to repeat the fun of the previous day.

“Yeah daddy!” she said.  ”We have so much green on the screens today.  Yeah….yeah……yeah….!!!”

“No honey,” I replied.  ”We don’t want green today, we want red.  Lot’s and lot’s of red.”

“But, but….I thought we liked green?” she said.

“Not today sweetie.  Daddy has a ‘short’ position today.  We make money when we see red, not green.”

With that, a confused and hurt look came across her little face, as if I had told her that Santa Claus, The Tooth Fairy, and The Great Pumpkin were all make believe.  At the tender age of four the market had already scarred her.  She has never traded since.

So with all the market’s anti-social characteristics, why then do we do it?  Why do we trade?

Life is a series of random events and our nature drives us to try to make sense of those events, to attempt to control them, and ultimately to find some sort of meaning in them.  Man has done this in one form or another since first walking upright.   In the markets we watch the randomness and try to find order.  We look for things that we can recognize and understand like patterns, and then try to exploit them to show our mastery and control.  The “meaning” we attempt to extract is money.

On the surface we convince ourselves that we trade for a number of reasons; to gain wealth, for the challenge, or for the freedom it brings, and though all these things may factor in to some extent, there are certainly other activities we could have chosen to pursue that would fit the bill.  But in fact, the real reason we trade is to experience that more concentrated, more intense, micro version of the larger quest for the meaning of life.  Or to put it another way, if everyday living is the coffee of life, then trading is the double espresso.

And as in life, we take a lot of swings, and there are a lot of misses.  There are times when we get flashes of insight and think that we have attained some permanent wisdom, only to find out in an instant that we are not as wise as we thought we were.   We try to learn from our mistakes, to keep moving forward, always remembering that tomorrow is a new day.  That with each opening bell we are washed clean again, with new opportunities to take and new challenges to face.  Ultimately we don’t know how long our journey will last or what the final outcome will be, but as long as there are markets to trade we will continue to strive for the day when we finally “get it right.”  At least until tomorrow.

If you want to learn more about trading and the markets, all while helping to kick pediatric cancer’s ass, check out my book, Trading: The Best Of The Best – Top Trading Tips For Our Times.  It includes over 200 market tips from 60 active traders and investors, and all proceeds go to the McKenna Claire Foundation to help support research for a cure.  Just click the banner below or go directly to Amazon by clicking here.

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  • Jeff Watson

    Why chant and cheer? It’s only money and you are either right or wrong, and you should know what to do to correct the wrongness.

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  • http://kiddynamitesworld.com Kid Dynamite

    fyi, in this post you accidentally hit upon the core of my trading “strategy”… basically, I take a long position in something, and then enter full cheerleader mode:

    “WE WANT GREEN…!!! WE WANT GREEN…!!! WE WANT GREEN….!!!”

    • nilsm

      I do the same, but with a lot more profanity.