Sunday, May 27, 2007

The Heroic Dimensions of Trading

For me, there's no better time than a long holiday weekend to step back and ask the big questions: those that deal with the meaning and significance of being a trader. These segments from my two books capture much of my sentiment on the topic.

"It is better to struggle in the service of one's dreams than to find instant success at meaningless work. The greatest joy in life, George Bernard Shaw once wrote, is being used for a purpose you recognize to be mighty. The greatest fields--those that are a calling and not a mere job--give one room to expand and develop oneself. There is only one valid reason for trading the markets, just as there is only one valid reason for being a psychologist, a dancer, or an architect: because it is your calling, the arena that best draws upon one's talents and passion for self-development." - The Psychology of Trading, p. 317.

"There are few arenas left in life where the independent individual can enact the heroic struggle...This, I believe is the eternal allure of the markets. With a reasonable stake and an online account, each person can undertake his or her own gold rush and enact the highest entrepreneurial quest. Like salmon that swim upstream to spawn, sperm that pursue the egg, and prospectors that dig for precious metal, many will be called and few chosen. It matters not. What matters is the dignity and the dimension of soul conferred by one's noblest impulses. It is not desirable to rule in hell or to serve in heaven; far preferable, to paraphrase Ayn Rand, is to fight for tomorrow's Valhalla in order to walk its halls today." - The Psychology of Trading, p. 318.

"Let us not forget what it means to be a trader. It means that I am free to own property: shares of a private company or contracts in a commodity. I can take delivery of my property and dispose of it as I wish, or I can trade it to others. My decisions are mine to make; I need not follow the dictates of those who would put other interests--those of gods, governments, or guns--above my own. If I lose, it is my loss. If I profit, the gain is mine...Without freedom, there is no trading. Trading is a celebration of economic and political freedom. Slaves are traded; they do not trade." - Enhancing Trader Performance, p. 253-4.

"What are we really developing when we train for expert performance in any domain? We develop skill and knowledge, to be sure, but we also develop more than that. We cultivate will: the ability to formulate goals and direct our actions toward reaching those goals. Every training session is a battle of will: a struggle to overcome our limitations and reach a particular performance goal...When you enhance your performance as a trader, you replace a small piece of randomness with intention. To that degree, your outcomes are self-determined. If you train yourself properly, you will become not only a successful trader, but a more self-determining human being." - Enhancing Trader Performance, p. 254-255.


Ayn Rand and Objectivism

Colin Wilson

"Dr. Miller says we are pessimistic because life seems like a very bad, very screwed-up film. If you ask "What the hell is wrong with the projector?" and go up to the control room, you find it's empty. You are the projectionist, and you should have been up there all the time." - Colin Wilson

"Every man builds his world in his own image. He has the power to choose, but no power to escape the necessity of choice." - Ayn Rand


mOOm said...

I like the intellectual challenge and freedom of trading - but one thing holding me back from doing it fulltime is the sense that it is basically meaningless unproductive activity - a zero sum game sucking money away from some to others. That is when you are trading your own account. Making money for other people might be more rewarding in this sense. You re combining your trading with psychology and helping others. Would you feel as good about trading if it was your sole occupation? This is something I'm thinking about as I contemplate quitting my job and becoming a trader (in order to follow my partner to a new location).

Brett Steenbarger, Ph.D. said...

Hi mOOm,

I can't say that I find trading to be a "basically meaningless unproductive activity"; I think the quotes in my post indicate how I find value in trading. That having been said, I know where my greatest interests and talents lie, and that's in the field of psychology. I wouldn't feel good about trading as a sole occupation, not because it's sucking money from others or unproductive, but because so much of who I am would be underutilized. I do think it's important to deeply believe in what you're doing and, if traders don't *value* trading, I doubt that they could truly pour themselves into it and achieve expertise.



Serris said...

Thank you for sharing these wonderful quotes with us! I especially liked the one about cultivating will. I definately agree there is a strong element of the hero's quest in trading. There are many elements commonly referenced: the holy grail, the overwhelming odds, the path one must walk alone, the search for the personal truth (or in this case, strategy), the sole determination of one's own fate.

There are so many reasons to love trading as a profession, but for me, I think the central reasons are the paradox of control, the search for the self, and the seemingly endless amount to learn. In trading, you have total control over your success or failure; you are the only one making decisions. And yet, you have absolutely no control over what the market does. That paradox of control is the quintessence of life itself! Trading constantly teaches you to be flexible, open-minded, and accept things as they are. You've mentioned before in your blog that people ask you incredulously why you share so much information. The more I read, the more I think there are really no secrets to becoming an expert in any field. The only "secret" is believing enough in something to put in the hard work! And most people can't believe in a trading strategy unless they've tested or invented it themselves and feel comfortable with it. I love that the only way to be incredibly successful is to use your unique talents. The markets are one of the few places where you can celebrate your differences. I also love the complexity of the markets. There are so many instruments, sources of information, and strategies, it would be impossible to learn them all. Unlike so many other things I have tried, the return on learning isn't a logarithmic curve; there are no diminishing returns.

Mac said...

While i agree with Dr Brett that there is so much more to trading than taking money from others, i could buy the argument that it is a zero sum game. But so what, if it feels meaningless than it is because we feel meaningless. Think of it this way ,one could take even few hundred dollars from ones daily trading profits and start a micro finance program in the developing world and literally change lives of hundreds if not thousands. How is that for adding meaning to a meaningless activity.
Its all upto you.

Brett Steenbarger, Ph.D. said...

Hi Serris,

Great thoughts; thanks much for commenting--


Michelle B said...

Do all medical doctors, teachers, lawyers--professionals who do 'good' for others--always do good, and never bad? The negative value judgments placed on all traders are just as useless as thinking that a doctor/teacher can never do grievous harm, or for a depressingly large number of them, just mediocre work.

As a home-based trader, not only do I provide liquidity, I also have a small carbon footprint--less work clothes, less restaurant-prepared meals, hardly any commuting.

If a trader can support her/himself and their dependents with less of an environmental footprint, then that is a positive endeavor in itself. Furthermore, if that trader can generate surplus income/time that he/she can re-distribute per their charitable guidelines, then trading is a societal-enhancing profession.

Brett Steenbarger, Ph.D. said...

Hi Michelle,

Thanks for your great comment. I also don't buy into the notion that one's value is to be measured in altruistic terms, in terms of service to others. Ayn Rand discusses this in detail in her provocatively titled "The Virtue of Selfishness". Making the most of your capacities; being the best you can at the activities you choose, from relationships to career: that is the true measure of an individual. The world has greatly benefited from the authors, scientists, and thinkers who have chosen just such a path.


cpptrader said...

"If you train yourself properly, you will become not only a successful trader, but a more self-determining human being"

Good post - I really like the quote above from your book. It calls to mind a post you had a few months back:

"Gurdjieff's insight was that we lack intentionality because we fail to remember ourselves. In a state of self-awareness, we vow to do the right things. Once we exit that self-awareness, the right things vanish with it."

When you stop and think about it, everything in life can be affected by intentionality. But trading in particular: Do you keep to your money management rules? Do you take the effort each night to test a theory/system/rule you had previously come up with? As simple as it is, I've kept that comment on Gurdjieff in the back of my mind. People often ask me how it is possible to work on an MBA, study for the CFA, work at an investment bank, spend time with my wife, research trading and quantitative methods, etc. Intentionality is the means by which any individual can work at their ability.

Great weekend musings, Brett. Regards,

Brett Steenbarger, Ph.D. said...

Thanks, Matt; great comment re: the link between intentionality and productivity. If we veer from our intentions because of shifts in our state, it follows that the ability to control the states we're in should further our ability to reach our goals--


mOOm said...

Great comments - I wasn't saying that trading WAS meaningless but that I often feel that it is. I am also frustrated with my academic work because little of it seems to result in something useful. The problem is probably in me. There's nothing at all wrong with living from trading. And there are lots of positives. The question is how much time do I want to devote to it versus other things.

ML said...

Great post and comments!

GaveKal once justified traders/investment bankers' salary by saying that they provided "efficiency capital", but I suspect few outside of Wall St. buys that.

This whole exchange reminds me of chess which was my passion years ago. It's not a productive activity in the normal sense, but I thought and still think it quite noble a career. Most professional chess player consider themselves "artists", and those versed in the medium agree by and large. This medium also happens to provide a clear judgment of the quality of the work.

I suppose trading can be viewed the same way.

Maximiliano said...

Thank you for all your comments!
Reading your opinions I could think about my believe that trading is an activity which does not add any value to the society.

I am convinced that trading is very important for the capitalism. Just thinking in a world without markets.... it is scary... I just think that traders add value since they take risks that other people / enterprises / etc. needs to delegate... and as a trader, manage that risk. That is the value of trading. Good manage of risks, not only for you as a trader, but also for the other business / people that are not capable of take that risks.

tim said...

Great post, Dr. Brett. I completely agree with the idea that trading is a microcosm of life in all the ways you've mentioned and that success in trading, as in life, results from personal excellence and increased self-knowledge. I really like the idea that one of the results of becoming a better trader is that as a result we become a more effective human being.

However, I disagree with the idea that personal excellence is worthy as an ultimate end when it is not guided by some moral grounding. There are several example throughout history of individuals who were "excellent" but who, because of their moral framework, did vast damage to human society. Admittedly the line between what is good and what is bad is fuzzy but it is when we detach our striving from any reflection on the impact of our actions on others that we run into trouble.

Trading in itself is not bad - but as someone wrote, we must each determine for ourselves the impact our trading has on society as a whole. And in this context it can be a strong positive force.

Thanks for your posts.