Monday, October 05, 2009

Reflections on Freedom and Commitment

I want to thank a perceptive reader for passing along this insightful post regarding freedom, choice, commitment, and restlessness. It is well worth reading both as a life lesson and as an insight into trading problems.

The key idea is that we can only maximize our freedom through commitment. While it may seem that unlimited choice offers the greatest opportunities for freedom, that generally is not the case. When supply is unlimited, value is reduced: unlimited choices lower the value of each marginal selection. To maximize choices, we should probably always eat at buffet and salad bar restaurants. That, however, would not necessarily maximize our dining pleasure: a more limited, gourmet selection is likely to prove more satisfying.

Similarly, we could have a different bedroom partner every night, but would that maximize either freedom or well-being? A slave to passions, like the glutton at the buffet, is hardly free. A long-term romantic relationship offers a depth and breadth of experience that can only be found in the context of commitment.

I believe the same principle applies to trading. At some point, we have to commit ourselves to the trade and gain the profits and confidence that result from a market move that reaches its targets. Too often, traders seek the freedom of trading in and out of their ideas, never seeing their positions through. That isn't freedom--most often, it's giving into fear--and it rarely maximizes opportunity.

When I had to submit a picture of myself to my university alumni book, I sent the above photo. It's no mistake: I think of myself as part of a couple, part of a family. In that commitment, I've found greater freedom and fulfillment than I ever knew as a restless single person. It is the same with our trades and plans: when they are working for us, we stick with them and see them through. Promiscuity in trading works about as well as it does in relationships...and for much the same reason.