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It’s been said that there is no better place
to observe human behavior than on a trading desk. When I first
worked in that environment in New York, I heard a comment that I
found perplexing. A relatively new trader had entered the room,
strutting and boasting openly and loudly of his recent
successes.
“I did it again! Making money and acting funny! I am on fire,
baby! I am the man!”
The trader went on and on about how he was “always right on
target” and just couldn’t seem to lose.
Shaking his head at this garish display, an experienced trader
seated nearby turned to the person at the next desk and said,
“The market gods will not approve of this.”
Although I didn’t understand at the time, his meaning soon
became clear: The markets have a tendency to humble those who
become too proud, and the bragging trader was tempting fate by
openly reveling in his recent success. Traders who are
successful over the long term rarely allow their victories to go
to their heads, because in trading and in everyday life, pride
often precedes a fall. Consider it a sort of “market karma” that
keeps traders in line when they become too full of themselves.
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In fact, in the professional environment,
traders who are performing exceptionally well are often asked to
rein in their trading. The risk management department of a
trading desk understands, through years of experience spent
observing traders, that often our greatest victories are
followed by our worst defeats.
Is there really an outside force that controls the fates of
traders? Are the market gods quietly observing, waiting for
traders to slip up and violate some code of conduct?
No, traders sabotage themselves when they lose perspective.
Successful traders sometimes become overconfident, and then move
away from the very elements that gave them success in the first
place. The market gods—or karma, or yin and yang, whatever you
want to call it—are really just an expression, a personification
of this tendency toward self-sabotage.
Respect the market in the same way that a sailor respects the
sea. Like an ocean, think of the market as a vast force of
nature that can be navigated but cannot be dominated. Keep your
head on straight when you’re trading well, and fight the urge to
declare victory over the market. |
