Why are people attracted to trading?

[hollisnan 10]

Outside influences can be POSITIVE, too. Like getting a trading education from a reputable school. Subscribing to newsletters, both online and print. Participating in chat rooms and forums. Attending relevant meetings -- AAII, MTA, Meetup groups, lectures at your local public library, etc. (I host a fellowship of more than 260 full-time traders on Meetup, NYC Private Investors. We have heard great speakers like Jim Farrish, Ruth Roosevelt, Adrienne Toghraie, and Ed Ponsi and we also get together just to talk to each another.)

 

With the exception of formal education classes and professional groups like AAII and MTA, all of these resources are FREE. In fact, a savvy web surfer can create an entire curriculum of free education from excellent sources. Again, you have to vet EVERYTHING for quality and veracity, but that's part of your job as a trader. Some of those who claim to have been fleeced have, in reality, simply fleeced themselves.

[Tradewinds 12]

I think the "evil" that happens to us that makes us poor traders is that we are taught to share and be kind.

 

I think that adapting a mentality of being ruthless, predatory, opportunistic and stalking your "prey" may help some people be more successful at trading. I get the impression that some traders take on this mentality, and this point of view as a strategy to put themselves into a mental state that helps them to be more objective and disciplined in their trading.

 

I'm not saying it doesn't work. And I'm not saying that I wouldn't, sort of, engage in those things myself when trading. I guess I would practice opportunistic and "predatory" strategies in the sense that it will make a profit.

 

I don't want to get too far off the original thread topic, so I won't take this topic any deeper. Maybe I'll start a new Thread somewhere.

[Tradewinds 12]

I do suppose that we can be genetically predisposed to certain things. I doubt that there is a trading gene . . .

 

I don't know that there is a "trading gene" that attracts people to trading. I would not rule it out though.

 

I watched an interesting science TV show that documented a study done on why some people find the taste of broccoli bitter. They scientifically proved that some people have different taste receptors in their tongue. It is genetically determined. There is NOTHING you can do about it. You have absolutely no choice in the matter. If you have a certain genetic make up, broccoli WILL taste bitter to you. Period.

 

So my point is, that we do have traits that are genetically pre-determined. And although I can't state that there is a "risk taking gene", I would not rule it out either.

 

It is possible for people to acquire a tolerance, or even a preference for something that they originally did not like at all. And it is possible for people to become aware of their pre-dispositions, no matter what the origin, and consciously and willfully affect the final outcome. So I'm not saying that we are doomed to being slaves to our genetic and environmental programing.

 

I believe that a certain percentage of the population will be attracted to risk, or acquire an attraction to risk. Without risk, there probably would not have been the advancements in knowledge and technology that we have today.

 

The obvious reasons people are attracted to trading have already been stated. Income, opportunity, freedom, lifestyle, etc, etc. That's kind of a "no brainer".

[BigAl_LBL 10]

Why are people attracted to trading? They look at the pros and the cons but how they look at them depends on what sort of people they are. The same features that are appealing to some people are horrifying to others e.g.

 

PRO's

No Boss

No Employees

No Set Hours

No Board Room Politics

Potential Income

 

CON's

No Boss (You will have to be much tougher at disciplining yourself than any boss)

No Employees (No companions = lonely profession)

No Set Hours (You will not know when to stop and will work every waking hour if you are not careful)

No Board Room Politics (No one to stop you if you ideas are b*11*,[|{5)

Potential Income (no guaranteed income and a good chance of losing what you already have)

 

Having looked at the pro's and con's I still think it is the best career choice and even if most people fail that still means some people succeed. It is also quite unusual in that you can scale yourself into making it a full time career and try again after time away rebuilding your account. (@grandwiz I have to disagree with the idea of needing a license to trade your own funds - they are you funds to do with as you see fit including blowing them on bad trading, but each loss teaches a lesson (if you are willing to learn) and the result of those lessons should be better trading)

 

Having been attracted to trading you then still need to take the plunge and actually trade. Again, different people will opt in and opt out when staring at the leap into the unknown.

In my opinion it is surely it is better to have tried and failed than to sit back and never attempt anything in case you fail but that is just my opinion and of course there are those that will disagree with me and that is why they will choose different careers - we are very fortunate to live in an age where we have that choice at all.

[SIUYA 11]

 

In my opinion it is surely it is better to have tried and failed than to sit back and never attempt anything in case you fail .

 

very true.

 

I liked your analysis as well that the same things that attract some people also scare others. Many people have asked me how I do what I do, then I give them my oft quoted comparison (as I grew up on a farm)

..... a farmer puts $500,000 a year into the ground and crosses his fingers that the weather, the markets, labour costs etc; all the things outside his control line up.....who is the real risk taker?

 

As an addendum....I do know of traders who made money, and would rather do other things. This is not a failure, this is just people who realise that there is more to life than making money trading, if thats is not what you are passionate about.

[Ingot54 13]

In Queensland, Australia, I believe you are not allowed to open a small business venture until you have completed the government's accredited Small Business Course ... and passed it!

 

Why is this different in trading? Mainly because of the structure of trading - no employees to protect, no insurance required, no creditors to pay.

 

In fact the general public doesn't get injured if you fail - other than having to fund a pension for you when you are on the pointy end of your butt in retirement years, and you have squandered your money in a pursuit that you are ill-equipped to follow.

 

Tradewinds has started an interesting discussion here:

 

http://www.traderslaboratory.com/forums/30/right-coach-mentor-3335-2.html#post114653

 

about whether traders need to be more skilled or even formally qualified before being let near a trading platform.

[culpepper 10]

People should qualify for a license before they are allowed to trade. Will save alot of people money.

 

Morally I have to agree with grandwiz. Many wannabe traders need to be "protected from themselves". A license would save a countless number the heartache and wallet-ache of blowing up. This business is like a meat grinder, chewing up and spitting out the noobs.

 

However the businessman & trader in me asks, "If new traders suddenly had to pass a license exam to qualify, who would take the other side of my trades?"

 

 

evil laff heh-heh-heh-heh

 

:security:

[Rande Howell 10]

MightyMouse properly identifies the four categories of trading mistakes. This applies to someone who has already "succumbed" to the attraction of trading and has made the decision to trade.

 

IMHO, the things that attracted me to trading were broadly superficial but valid (the desire for financial freedom, independence, recognition of limited alternatives). The things that KEEP me trading are deeper and equally valid (an appreciation of the required discipline, pride in accomplishment, and the opportunity to create a profession and livelihood that I can maintain for the rest of my life, regardless of age and possible infirmity.) The initial reasons morphed as I learned more about trading and what it entails.

 

In a riff on that old saw... "Many are called, few are chosen, and only a handful are successful." The field narrows as the challenges of trading discipline and risk management flush out the ones who can't handle it or don't want to. Caveat attemptor!

 

It's like a moth dancing with the light of the fire. What attracts the trader initially is not the reality you find. And many traders have to die of their old motivations as they embrace the reconstruction of the self that makes traders successful long term.

 

Rande Howell

[samanthasing 10]

I tend to think it's much less romantic than traders make it out to be. Ultimately human beings, and particularly investors, are overconfident. For example, I think if we asked everybody discussing on this thread if they thought they were an above average driver, 9/10 would say yes.

 

Of course there are many factors that play into it, and it would be ignorant to not attribute some of it to the love of risk, opportunity to "make big bucks", and the potential for independence.

[Rande Howell 10]

I tend to think it's much less romantic than traders make it out to be. Ultimately human beings, and particularly investors, are overconfident. For example, I think if we asked everybody discussing on this thread if they thought they were an above average driver, 9/10 would say yes.

 

Of course there are many factors that play into it, and it would be ignorant to not attribute some of it to the love of risk, opportunity to "make big bucks", and the potential for independence.

 

Some come to love the game. It's like a puzzle. And as they unravel it, they discover it is really a puzzle about themselves and their relationships with others. For the most of traders, the thinking that got them into trading are not the thinking that will bring them success in trading. They have to fundamentally change the way they preceive and react to the world in the microcosm of trading.

 

Rande Howell

[TheNegotiator 13]

I would say that for most people it is all about the money and the instant gratification from any successes we have. In fairness, from a psychological point of view, I am sure traders have many similarities to gambling addicts!

[hollisnan 10]

IF traders do, in fact, have an "addiction" similar to gambling, they probably won't last too long. Successful traders replace emotion with discipline.

[Qiman 10]

I would say that for most people it is all about the money and the instant gratification from any successes we have. In fairness, from a psychological point of view, I am sure traders have many similarities to gambling addicts!

 

There certainly are those of such personality who are attracted towards trading, but I believe most of them just add to the statistics of how many people lose money in trading! The only people who are going to succeed longer-term in this brutal game eventually have a great deal of character in several critical areas,(quite the opposite of addicts) for the game requires one to have extreme self-honesty and discipline, something rare in the general populace.

 

Where I live there are reservation casinos all over the place. I can't even stand the energy of them from a distance, and have never been tempted to go into one. I hate gambling, and never particularly liked games where it is basically chance, always preferred that the outcome was largely dependent on skill, like chess, which I adored. Strategy, looking ahead, anticipating the moves of the other, calm yet alert focus.

[TheNegotiator 13]

Surely you see punters and professional gamblers as different Qiman? I'd also like to ask you whether your strong feelings here stem more from the deeply engrained socially acceptable or otherwise...

[Qiman 10]

Surely you see punters and professional gamblers as different Qiman? I'd also like to ask you whether your strong feelings here stem more from the deeply engrained socially acceptable or otherwise...

 

Yes, professional gamblers have a great deal of skill, and are using their hard-won knowledge of probabilities to make money. They have some elements in common with traders.

 

My post had nothing to do with deeply engrained social norms; as I travel the world far and wide I am an observer of what strengthens or weakens individuals and cultures. In this area where I live, there is a huge problem with gambling addiction, and I have seen it destroy many marriages and careers. And it often has led to alcoholism as well. The house is largely the only winner . . .

[Rande Howell 10]

IF traders do, in fact, have an "addiction" similar to gambling, they probably won't last too long. Successful traders replace emotion with discipline.

 

I figure that the people I work with is self selecting, and what I see is a fairly conservative group of people who are trying to build a new career that allows them freedom from corporate culture and financial freedom. I don't see gamblers. I see traders with impulse problems that want to address the problem so they can become effective in the heat of trading and I see people who are motivated to distinguish between the management of the risk of uncertainty and fear based thinking. I have no doubt that there are gamblers, but why would they ever want to talk with me -- there beliefs would have to change.

 

Rande Howell

[TheNegotiator 13]

Yes, professional gamblers have a great deal of skill, and are using their hard-won knowledge of probabilities to make money. They have some elements in common with traders.

 

My post had nothing to do with deeply engrained social norms; as I travel the world far and wide I am an observer of what strengthens or weakens individuals and cultures. In this area where I live, there is a huge problem with gambling addiction, and I have seen it destroy many marriages and careers. And it often has led to alcoholism as well. The house is largely the only winner . . .

 

True. But if trading were glamorised to the same extent as it is in casinos - and drinks were brought to you every few mins, might trading not be very similar in outcome? The games themselves and why we are attracted to playing them is perhaps far closer to trading than you think.

[TheNegotiator 13]

I figure that the people I work with is self selecting, and what I see is a fairly conservative group of people who are trying to build a new career that allows them freedom from corporate culture and financial freedom. I don't see gamblers. I see traders with impulse problems that want to address the problem so they can become effective in the heat of trading and I see people who are motivated to distinguish between the management of the risk of uncertainty and fear based thinking. I have no doubt that there are gamblers, but why would they ever want to talk with me -- there beliefs would have to change.

 

Rande Howell

 

To me, gambling is just another badge society has to put on something so they can believe they understand it. More than anything, gambling and betting are just ways of describing the opportunistic nature we humans have. Double your money! Or many millennia ago - feed your family for months but maybe have to fight off scavengers to get your reward. The point is, I feel we are all risk takers at heart (semantics aside from whether you think gambling is thought out risk taking or not). That is potentially a reason we are attracted to trading.

[Qiman 10]

The whole subject of risk taking is fascinating. But I have a different tack on it than you do. One of my professions is that I teach ancient wilderness survival skills in very rugged areas, and I am often out there alone for a week or more at a time pushing my skills with little to no equipment. I am constantly engaged in risk taking, but these are very calculated, careful risks based on decades of tough experience. If I do something stupid out there I am in major trouble, and help is far away. And actually it is risk management, because uncertainty is around every corner with wild animals, violent weather, etc. Generally I usually have the skills to manage this risk, just as top traders have the skill to manage risk in their selected trading instruments. ( I am a writer as well, and have a trading magazine article in mind ).

 

I feel that a huge problem with most traders is that they never fully EMBRACE risk and the continual uncertainty, they think that they are embracing it, but they are scared to death much of the time. Because of unresolved emotional issues not all parts of them are on the same page, and wise risk management is almost impossible in such mental/emotional chaos. Most people fail at trading, and this is a major cause.

 

BTW, many Americans that I know are quite the opposite of active risk takers, they have settled into jobs that are boring and which they hate, but they want the "security." They are "opportunistic" as you put it, but in a very different way. And they often ask me how am I not constantly afraid in some of the areas which I explore, they would rather watch adventure on TV instead of living it.

[SIUYA 11]

nicely put Qiman - its like base jumpers and the such. They are risk loving but at the same time very focused on the management and minimization of the downfalls to taking those risks.

 

Now weather or not its based on emotional issues or just the plain lack of stopping and thinking about things before hand - it is always still amazing how even for simple things people dont think about it first.....this applies to many many issues and everyday things in life.

eg; why do people drive around in busy car parks looking for the rock star park, when they could go straight to the spots that are highly likely to be empty but slightly further away? Its actually a very interesting thing to watch people spend ten minutes of frustration driving around to save a 2 minute walk.

[samanthasing 10]

^ TheNegotiator I like the analysis overall, but I don't know if I agree with gambling just being a manifestation of opportunism.

 

The idea behind gambling (in my mind) is that it is technically supposed to be random whether you win or lose. Of course there are different shades of this as some types of gambling involve more skill than others, like futures trading or poker. With these as your skill level increases your average reward should as well. However, ultimately the idea of pure gambling is that it's betting on a random outcome, and that bet carries with it a high reward to somewhat offset the high risk.

 

By doing an analysis of the risk-reward ratio you can find that virtually all gambling is technically irrational, as all bets will have a negative NPV, and thus the mentality that drives people to gamble is irrational and warrants further analysis. Of course as your skill level increases in something like futures trading the NPV of your bets should go up too, and at some point maybe even become positive.

 

Opportunism is just reaching for an opportunity when it is presented, and risk isn't an aspect of it. I fully agree that humans are all fundamentally opportunistic, but obviously the real world is more complicated than that.

[TheNegotiator 13]

^ TheNegotiator I like the analysis overall, but I don't know if I agree with gambling just being a manifestation of opportunism.

 

The idea behind gambling (in my mind) is that it is technically supposed to be random whether you win or lose. Of course there are different shades of this as some types of gambling involve more skill than others, like futures trading or poker. With these as your skill level increases your average reward should as well. However, ultimately the idea of pure gambling is that it's betting on a random outcome, and that bet carries with it a high reward to somewhat offset the high risk.

 

By doing an analysis of the risk-reward ratio you can find that virtually all gambling is technically irrational, as all bets will have a negative NPV, and thus the mentality that drives people to gamble is irrational and warrants further analysis. Of course as your skill level increases in something like futures trading the NPV of your bets should go up too, and at some point maybe even become positive.

 

Opportunism is just reaching for an opportunity when it is presented, and risk isn't an aspect of it. I fully agree that humans are all fundamentally opportunistic, but obviously the real world is more complicated than that.

 

Isn't it just that when you see people who trade or gamble, actually although they may feel they know the risks involved, they really don't understand them properly. So although they see opportunity and feel they have appropriately weighed the risks involved, actually they are just rolling the dice. That's why most people lose. All these 'games' are effectively run by people and institutions who have fully analysed the risks involved and have a much better understanding of how they work. They are the 'house' and they profitable traders and institutions. They do see opportunity.

[Rande Howell 10]

I feel that a huge problem with most traders is that they never fully EMBRACE risk and the continual uncertainty, they think that they are embracing it, but they are scared to death much of the time. Because of unresolved emotional issues not all parts of them are on the same page, and wise risk management is almost impossible in such mental/emotional chaos. Most people fail at trading, and this is a major cause.

 

BTW, many Americans that I know are quite the opposite of active risk takers, they have settled into jobs that are boring and which they hate, but they want the "security." They are "opportunistic" as you put it, but in a very different way. And they often ask me how am I not constantly afraid in some of the areas which I explore, they would rather watch adventure on TV instead of living it.

 

Biology, brain, and psychology really light up in your comments. The brain (particularly the Americans who sit in front of TV's for their quoto of excitement), is built to avoid uncertainty because it produces ambiguity -- and out of ambiguity the emotional state of confusion is triggered. The fear biased emotional brain interprets confusion as the fear of death. Then you put that state of affairs in a modern human being in front of a computer screen trading and it spells trouble for a disciplined and impartial state of mind. Life itself is management of uncertainty. If uncertainty is glued to fear, you have a losing trader. We all need to be tested, which life or trading will do, and the trader must train themselves to bring a more empowered mindset to the uncertainty of trading. Or he is essentially gambling.

 

I can see how your experience in the wildness of nature hones a state of mind suitable for trading. Maybe you ought to develop a business around taking traders out into the wilderness.....

 

Rande Howell

[zdo 20]

True. The games themselves and why we are attracted to playing them is perhaps far closer to trading than you think.

 

Precisely!

Gaming is around the circle or table pretend trading. Instead of outcomes being determined by the global mkt, chance is conveniently substituted. The flow of play and strategies involved for each game of 'gaming' is limited to recreating certain real life market and trading situations. The games of 'gaming' one enjoys and is competent at can tell a lot about what style of trading he should go toward etc...

Professional gamblers are actually not gamblers at all. They are traders adept at on the fly assesment of probabilities, other gamers, and sizing decisions... these days particularily, the level of skill and the individual's intrinsic rewards of that middle proficiency, reading others, determines whether or not they play at the tables or at the screen

[MightyMouse 12]

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