Why are people attracted to trading?

[SIUYA 11]

When I describe trading as a business it means i take it seriously - i have a plan, i have realistic budgets, I think about the risks, the management of money. etc;

It does not mean the business model is the same as other businesses and there are customers, inventory, invoices etc;

Just because someone describes trading as a business does not mean it needs to fit into your idea of a business model.

On the same note too many business people are actually very good sales/presenting people - the alhpa male as Rande says.

This means nothing in trading (except in the old days, intimidation on the trading floors did work to a degree). Great presenters, ideas men, sales people will likely struggle as the the market does not care about how impressive it seems. Leave this job to the CEOs etc;

We were discussing this in our office the other day as all the brokers are pushing stocks - saying things such as " this is cheap, if you loved it at 9 you really like it at 6, i dont think you should panic, I dont think this will fall through this level........"

 

Most are wrong, they are one trick ponies with no real market knowledge, and just as much insight as a monkey - or your average trader. (not to knock brokers, as most of us get our guesses wrong). The point being, these guys job is to get us to trade, usually to go long. Their skills are completely different to those of a trader, and one of the skills of a trader is to not listen to this, or at least beable to distance themselves from the sales pitch. To play their own game so to speak.

As someone in the office said - they say there is no "i" in team - there is no "us" in trading

[MightyMouse 12]

When I describe trading as a business it means i take it seriously - i have a plan, i have realistic budgets, I think about the risks, the management of money. etc;

It does not mean the business model is the same as other businesses and there are customers, inventory, invoices etc;

Just because someone describes trading as a business does not mean it needs to fit into your idea of a business model.

On the same note too many business people are actually very good sales/presenting people - the alhpa male as Rande says.

This means nothing in trading (except in the old days, intimidation on the trading floors did work to a degree). Great presenters, ideas men, sales people will likely struggle as the the market does not care about how impressive it seems. Leave this job to the CEOs etc;

We were discussing this in our office the other day as all the brokers are pushing stocks - saying things such as " this is cheap, if you loved it at 9 you really like it at 6, i dont think you should panic, I dont think this will fall through this level........"

 

Most are wrong, they are one trick ponies with no real market knowledge, and just as much insight as a monkey - or your average trader. (not to knock brokers, as most of us get our guesses wrong). The point being, these guys job is to get us to trade, usually to go long. Their skills are completely different to those of a trader, and one of the skills of a trader is to not listen to this, or at least beable to distance themselves from the sales pitch. To play their own game so to speak.

As someone in the office said - they say there is no "i" in team - there is no "us" in trading

 

Trading and other businesses are remarkably similar. Sales, marketing, inventory management, profits, losses, costs, revenues, etc. I personally think that there are a lot of other businesses that are more lucrative than trading, given the amount of time and capital you need to commit. Trading is certainly fun, but if one does not have enough capital, its a waste of time.

[SIUYA 11]

who are you selling and marketing to MM ?

I have to keep selling to myself

[MightyMouse 12]

who are you selling and marketing to MM ?

I have to keep selling to myself

 

In all seriousness when you sell merchandise in a store or however you operate, you are buying the product at one price and selling at another, hopefully, higher price. Sometimes if you do not sell all your have bought, you have to start dumping out before the inventory becomes obsolete (no one wants summer clothes in the winter). A lot goes into whether that item is an item you can sell that season in your location. A lot of times merchandise is bought that you cannot find enough buyers to take it and you have to mark it down fast at a loss or be stuck with junk. On the other hand, if there is high demand for your item, you do not have to mark it down; instead, you will be able to sell all of it at the price you hoped to get.

 

In the market when you buy, your hope is that other buyers will walk into the market and want to buy what you have already bought at higher prices. If the stock you bought, was bought wrong, you are going to have to dump out of it before it or you become obsolete, etc.

 

A slight difference may be how you handle supply and demand. So, if you went to open your store and saw there was a line 2 blocks long for your item, you would not likely raise prices right there and then because of the incredible demand; you would sell out at your advertised price. Any other action would be seen as gouging and would make for bad will. However, if you woke up one morning and saw that the demand for your stock had risen, you would squeeze every penny you could from the buyers. Price gouging happens all the time in the market.

 

It is very similar but the major difference is the liquidity of each. A lot of liquidity makes the market more competitive and harder to make money.

 

MM

[FXGirl 10]

With regard to the emotional aspects of trading, Rande speaks to a more general point when he talks about Type A personalities needing to tone down. In a world where we constantly interact with others, the strategies that we rely on most heavily to be successful such as being charming, humorous, interested, compassionate, loving, ingratiating, smart, aggressive, manipulative, and so on, don’t influence market movement. Traders, especially beginners, can feel adrift without being able to use the skills (strategies) that have worked in other situations. So what’s left?

 

Self-regulation strategies. How well can you monitor what’s happening internally, physically and emotionally? How good are you at soothing uncomfortable feelings? How long can you stay focused? Can you to persist in the face of difficulty?

[johnw 10]

With regard to the emotional aspects of trading, Rande speaks to a more general point when he talks about Type A personalities needing to tone down. In a world where we constantly interact with others, the strategies that we rely on most heavily to be successful such as being charming, humorous, interested, compassionate, loving, ingratiating, smart, aggressive, manipulative, and so on, don’t influence market movement. Traders, especially beginners, can feel adrift without being able to use the skills (strategies) that have worked in other situations. So what’s left?

 

Self-regulation strategies. How well can you monitor what’s happening internally, physically and emotionally? How good are you at soothing uncomfortable feelings? How long can you stay focused? Can you to persist in the face of difficulty?

 

 

Very well put FXGirl.... the inputs are essentially common to both successful Business people and to successful Traders, but how they are called upon is quite different ....well to me they are at least.

 

A successful Trader [or Professional Sports Person] will place certain skills to one side for the duration of the event and at the same time, ramp up other disciplines [skills]

 

One is not at the expense of the other IMO, but the priorities of skills in play are reassigned and over time we change the nature of our character.

 

It all sounds theoretical mumbo jumbo I am sure, but in reality it is just second nature

to do the obvious.

 

And then there is the matter of duration.

 

Business [and you can include RE], is on a long cycle.

This is due mainly to the fixed capital and cashflow demands of the business.

Trading [not investing] is on a short to very short duration cycle and requires more intense bursts of human input.

Most sport is no different to trading.

 

What is difficult for People entering the world of Trading, is to fully appreciate just how much they must commit themselves to change, in order to become seriously successful.

 

Mostly it seems, People are prepared to bend, but they are not prepared to break anything in order to rebuild themselves.

 

The fear of letting go is underwritten by fear of the Unknown, which is the sum of all fears ...well to me it is.

And yet we fail to appreciate the sheer size of the Unknown in our lives and how it shapes and determines our destiny.

 

In fact we are seldom who we think we are, which is limiting to say the least.

[SIUYA 11]

"In fact we are seldom who we think we are, which is limiting to say the least." - johnw -- good call

 

This is I think is often the part thats missing - too often - and no offense to anyone - all the changing yourself, and improving yourself, and modifying behavior is pointless when you are either unaware of who you are or deceiving yourself in the first place. This deception continues on a daily basis for many people, and the market shows this in the PL. How often do people believe that hindsight was in fact reality for them - they remember their winners, forget their losers and tell themselves and others they are picking the market brilliantly - when in reality IF they are actually trading their PL is vastly different.

 

So in keeping with the thread - maybe it is often that people are attracted to trading as they thrive on that self deception, and until they actually commit money they are living in their fantasy......and then even when they do commit money and loose often its the market that screwed them, the brokers, the government, the insiders, the instos, the market makers ------ everyone but themselves.

[ramonbarros 10]

Trading has one element not present in other professions (except for those who are professional gamblers): on a trade by trade basis, a total newbie has as much chance as a professional of making money. Experience, knowledge and skill count over the long run but for the next trade.....your guess is as good as mine.

 

This quirk is then hyped up so newbie's believe that a moment's success will be mirrored over a lifetime; once it takes hold, this illusion is hard to shake.

[MightyMouse 12]

Trading has one element not present in other professions (except for those who are professional gamblers): on a trade by trade basis, a total newbie has as much chance as a professional of making money. Experience, knowledge and skill count over the long run but for the next trade.....your guess is as good as mine.

 

This quirk is then hyped up so newbie's believe that a moment's success will be mirrored over a lifetime; once it takes hold, this illusion is hard to shake.

 

No doubt a newbie and a seasoned trader can definitively be in the same exact trade in the same exact direction at the same exact time, but a seasoned trader can make more money on that trade or less less money than a newbie would. Over time the newbie increases his take from a trade and reduces his losses or dies.

[SIUYA 11]

it is a good point - the lure of the win can suck many in and make them think its an easy game. The lure of the big win, of easy money.

 

We used to joke on the trading floor that the best trade a new trader could make was one that gave them a loss. It made them realise that losses occur, they are not the worst thing in the world, and if properly managed are part of the game.

When a trader starts their journey can also have a big impact on their mindset. Traders who start in a bullish market or bearish market can be perrenial bulls or bears - sometimes to their detriment. Always looking to buy dips in the wrong market can be fatal - if this is your mindset, turn the chart upside down it might give a different perspective

[Rande Howell 10]

"In fact we are seldom who we think we are, which is limiting to say the least." - johnw -- good call

 

This is I think is often the part thats missing - too often - and no offense to anyone - all the changing yourself, and improving yourself, and modifying behavior is pointless when you are either unaware of who you are or deceiving yourself in the first place. This deception continues on a daily basis for many people, and the market shows this in the PL. How often do people believe that hindsight was in fact reality for them - they remember their winners, forget their losers and tell themselves and others they are picking the market brilliantly - when in reality IF they are actually trading their PL is vastly different.

 

So in keeping with the thread - maybe it is often that people are attracted to trading as they thrive on that self deception, and until they actually commit money they are living in their fantasy......and then even when they do commit money and loose often its the market that screwed them, the brokers, the government, the insiders, the instos, the market makers ------ everyone but themselves.

 

What SIUYA and johnw are saying here is important for every trader to hear, particularly as they start becoming successful. Self deception can really kick in as the trader becomes successful. Right at this moment, this is really apparent to me. A former client of mine, who had become quite capable of emotionally regulating his emotions and had built a very good organization of self for trading, recently came back to me for help. But it was way too late. He is being charged with a Ponzi scheme for defrauding clients. He looked at me and told me that he never saw the self deception until he had blown up his $5 million account -- and a lot of others people's money in the process. Now as he is cooperating with the FBI, he is seeing that he blew a lot of money. He is waking up to his self deception. It is staggering to him. What's interesting is that this is a real decent guy. But one that was not vigilent to the destructive tendencies that live within each of us. He got seduced, little by little, by his self deception until the capacity to self observe the self was totally pushed aside.

 

So, even in success, the trader has to strive for self honesty and watch for deception. It may be easier to see the self deception and externalization of blame when the trader is losing, but the potential for self deception is always there. The other thing he said to me was that clearly he had not "gotten" my work. He said what he totally missed was that there is forever an internal struggle going on within the self. He came to believe he had conquered that internal struggle. This is self deception.

 

Rande Howell

[MightyMouse 12]

What SIUYA and johnw are saying here is important for every trader to hear, particularly as they start becoming successful. Self deception can really kick in as the trader becomes successful. Right at this moment, this is really apparent to me. A former client of mine, who had become quite capable of emotionally regulating his emotions and had built a very good organization of self for trading, recently came back to me for help. But it was way too late. He is being charged with a Ponzi scheme for defrauding clients. He looked at me and told me that he never saw the self deception until he had blown up his $5 million account -- and a lot of others people's money in the process. Now as he is cooperating with the FBI, he is seeing that he blew a lot of money. He is waking up to his self deception. It is staggering to him. What's interesting is that this is a real decent guy. But one that was not vigilent to the destructive tendencies that live within each of us. He got seduced, little by little, by his self deception until the capacity to self observe the self was totally pushed aside.

 

So, even in success, the trader has to strive for self honesty and watch for deception. It may be easier to see the self deception and externalization of blame when the trader is losing, but the potential for self deception is always there. The other thing he said to me was that clearly he had not "gotten" my work. He said what he totally missed was that there is forever an internal struggle going on within the self. He came to believe he had conquered that internal struggle. This is self deception.

 

Rande Howell

 

Rande,

 

I probably shouldn't speak for SIUYA and John, but I feel pretty confident that what you are describing is not what they meant by self deception.

 

You are calling a guy who ran a ponzi scheme a "real decent guy" in spite of his desire to steal others money who had entrusted him with it. I suppose John Wayne Gacy had some redeeming qualities too in spite of his one character flaw.

 

 

MM

[johnw 10]

"SELF DECEPTION" is not what I had in mind when I wrote ...

 

"In fact we are seldom who we think we are, which is limiting to say the least."

 

I am referring to people who are so tightly wrapped that they are unaware of who they are and therefore how they function.

 

It is our daily duty to unwrap ourselves and stay unwrapped.

This action alone will do more for our appreciation of Retail trading than anything else.

[Rande Howell 10]

Rande,

 

I probably shouldn't speak for SIUYA and John, but I feel pretty confident that what you are describing is not what they meant by self deception.

 

You are calling a guy who ran a ponzi scheme a "real decent guy" in spite of his desire to steal others money who had entrusted him with it. I suppose John Wayne Gacy had some redeeming qualities too in spite of his one character flaw.

 

 

MM

 

Self deception, whether in the form of self doubt or in the form of grandiosity, is still self deception. Just opposite ends of the continuum. Generally I work with traders who deceive themselves into believing the voice of their self doubt. Ocassionally a guy shows up who has fallen into the deception of his exaggerated worth. The guy I spoke about did not intent to fall into predition. In fact, once he saw what he had done, he turned himself in and has cooperated completely -- against the advice of his attorney. In addition, he is one of the founders of a church, supported orphanages long before he fell into the spell, helped start a school for Asperger's syndrone kids, supported financially and personally homeless shelters, and was active in prison ministries (very funny I know). He fell into the spell of deception and it corrupted the very core values that his life was based. And right now he is suicidal in his thinking.

 

If you have ever been around people, power, and money -- you discover this is more common than you would imagine. Go to Washington or Wall Street and it is the norm. Power corrupts; absolute power corrupts absolutely. The people he hurt were mostly family, personal friends, and Christian charities. It didn't start out as a Ponzi scheme. He had made a small fortune by shorting the housing market, and his investors were rewarded handsomely. Then in 2009 he began shorting the developing recovery. He bet against the ability of the Fed to print money and lost big. He then paniced and fell into revenge trading and lost more. Only then did he start lying. In his lying, he believed he was going to make up for the losses. By this time he was drinking strange Cool Aid and fell into total corruption of his values. And he will pay.

 

I offered this story to show the other side of self deception. For most, having the kind of success (fairly made) after struggling with trading for years is a pipe dream. Yet, it happens. And it needs to be a part of ourselves that we can be mindful of. This guy is mindful of this trap now -- only way too late.

 

Taking our blinders off our vision requires self honest work where we seek first to understand rather than a hardened heart that judges without understanding. From my point of view, except for the Grace of God, go I.

 

Rande Howell

[johnw 10]

Distressing times indeed Rande.

 

Was this your former Client's first taste of major financial success.

[SIUYA 11]

Johnw - sorry if i extrapolated further on what your point was, while they are different points, I actually find for many people its much the same - they deceive themselves because they are unaware of themselves.

 

Also Rande I have to agree with MM (not to be deliberately argumentative - more for the discussion ) - anyone who runs a ponzi scheme, who could even let themselves fall into this, who does not understand the checks and balances required and the upholding of ethical boundaries - is not a good guy. All the Christian (or what ever religious beliefs) charitable work does not make them a good guy. Often they do this as a guilt trip for themselves.

I am sure you are aware - as you say that "if you have ever been around people, power, and money -- you discover this is more common than you would imagine.." ----- this is so true, and often if you see these people throughout their career they have always been the same. They will look the other way, they will do back room deals and they will then always claim they made a mistake......

Rubbish - people do not suddenly start ponzi schemes, they dont suddenly steal. They have either been doing it in some form or another for many years, or its a cold calculated scheme. These are not crimes of passion.

Here is a story that I am sure you could relate to Rande, there was a guy in our office many years ago who front ran an order by dumping stock on another firm just before information was widely known to the rest of the market as it happened just after the close - it was a fine line between real insider trading and just plain crappy behaviour. After a few serious complaints from the buyer, our firm made him cancel the trade - most of us other traders saw all this and knew exactly what he was doing and told him he was wrong....

A few days later he was recounting HIS VERSION of events to a friend - how he was sorely done by, how he did not have insider info, how he should have been able to keep the trade. Well 8 others of us all turned and said to him, that his version of events were wrong - he stood up, and said to us "you are all wrong I am right" - sat down and never spoke about it again. This guy is a raving Christian always talking about values, giving money to this and that. He is a thief pure and simple, he self deceives, he is amoral and requires a formalised set of values as he clearly does not know right from wrong, he also did it all the time.

I have many stories like this from this fellow and from others - both good and bad - the finance industry definitely brings out the best and the worst in people, and I have never once seen an individual who suddenly became a criminal - they all think they can get away with it as they have been doing it for years.

 

Now self deception on behalf of trading is something different - surely related in many ways, but self deception, and the deliberate deception of others are two different matters in terms of the end results. Even if they may stem from the same place.

[TheNegotiator 13]

I think to some degree I agree with Rande here. It's a continuum of self-deception, but also and only slightly different, self-denial. Some guy taking money by corrupt or criminal methods knowingly might think that if they have that money, they can do good with it. What's the use in these rich guys having it anyway? Some dictator may think that by violently suppressing opposition, they are protecting their people and creating stability for the country. A trader is probably more in denial than anything though. You don't know what you are doing or you are not very good at self control or anything else, is not what you want to hear as a trader. Trading kills you or makes you grow up.

[johnw 10]

Personally I don't feel disposed to form an opinion, but I am interested to read more about this Client if Rande cares to continue.

[Rande Howell 10]

Distressing times indeed Rande.

 

Was this your former Client's first taste of major financial success.

 

On this level yes. He had sold a small software company that provided the initial capital for his trading. Interesting, I ask clients to become mindful of the "money conversation" to which they were born and from which they developed their perception of money -- and what money means to them. This guy grew up in a family where he could never prove his worth particularly to his father. Money became a measuring stick and then a drug when the situation arose. Know thyself really applies here.

 

Rande Howell

[johnw 10]

On this level yes. He had sold a small software company that provided the initial capital for his trading. Interesting, I ask clients to become mindful of the "money conversation" to which they were born and from which they developed their perception of money -- and what money means to them. This guy grew up in a family where he could never prove his worth particularly to his father. Money became a measuring stick and then a drug when the situation arose. Know thyself really applies here.

 

Rande Howell

 

All comes back to "feelings"

 

Try this advert for Wilson tennis rackets ...tell me the parallel with trading

 

[ame=http://www.youtube.com/watch?v=jSSTK9bfz7c&feature=related]YouTube - Wilson BLX Feel More 1 with Roger Federer- Court Couch- Wilson Tennis[/ame]

[Rande Howell 10]

All comes back to "feelings"

 

Try this advert for Wilson tennis rackets ...tell me the parallel with trading

 

Trying to find an external solution to an internal problem gives you a momentary fix. Like a seminar high, you feel on top of the world for a moment, but then the pattern (rooted in our woundedness) comes back and it's the same old game. Chasing the Holy Grail outside of the self without first attending the enemy within keeps people stuck in their suffeing. Transforming the self the last place people tend to look. I see alot of that in traders.

 

Rande Howell

[johnw 10]

Trying to find an external solution to an internal problem gives you a momentary fix. Like a seminar high, you feel on top of the world for a moment, but then the pattern (rooted in our woundedness) comes back and it's the same old game. Chasing the Holy Grail outside of the self without first attending the enemy within keeps people stuck in their suffeing. Transforming the self the last place people tend to look. I see alot of that in traders.

 

Rande Howell

 

You are very good ... must come from doing this for a living

[pbylina 10]

I want to be self independent and not be told what to do. Make my own decisions.

[Rande Howell 10]

Suiya

 

"Rubbish - people do not suddenly start ponzi schemes, they dont suddenly steal. They have either been doing it in some form or another for many years, or its a cold calculated scheme. These are not crimes of passion."

 

You're right. People don't suddenly fall into delivering a Ponzi scheme. And this trader didn't. There was a road to predition. Step by step, in his mindlessness, he was seduced into becoming a human being that he didn't recognize. The FBI characterized it as a Ponzi scheme. He didn't until he woke up to it. His view was that he could make up for the losses (after all he had been a superb trader for a number of years). All he needed was some time to make up for the losses and some extra capital.....

He always thought he would make it up. Remember, he wasn't caught -- he turned himself in. He could have transferred assets to safe havens and moved. But he didn't.

 

I don't agree with what this man did. And I expect him to be disciplined. When I worked violent prisoners, I worked with a guy who had beaten two men to death in a rage. As I came to understand his history and how he grew up, I could appreciate that violence was just a natural thing for him to develop into. He didn't set out to beat those guys to death, but he did anyway. I had compassion for him (I could truly understand how this natural born killer was created) and I wanted him to stay in prison for his protection and for society's protection.

 

And you're right there were missing checks and balances. This is not black and white. It is both/and. His problem was grandiosity and it ate him and many alive. Most traders act from self doubt and fear -- so this is not the direction that most are sweep away in. Within each of us is a destructive side that we need to become observers of. If we don't, it comtaminate the mind that trades.

 

Rande Howell

[SIUYA 11]

 

And you're right there were missing checks and balances. This is not black and white. It is both/and. ................ Within each of us is a destructive side that we need to become observers of. If we don't, it comtaminate the mind that trades.

 

Rande Howell

 

Its the checks and balances that are often missing (I dont have experience with violent offenders but the financial industry definitely throws up life in fast forward and the temptations to many brings out the best and the worst in people... often these people should be in jail...so my experience comes from this microcosm)

You're right there is no black and white and while trying to avoid any moral discussions, often those folks who dont develop a self check (I guess this is part of my description for "self deception", and JohnW of "not knowing yourself") - either through others help, or their own tricks, either become self destructive, or destructive to others. If in doubt you need to err on the side of any high moral ground, and too often people dont - they justify it with excuses such as - everyone else is doing it. (this is very often trotted out as an excuse in the world of finance)

 

Usually these folks have other red flags in their daily dealings (all generalised of course) - eg; they skip shouts at the pub, they cheat on their partner, they think its ok to evade (as opposed to avoiding/minimising) tax, they expand on their achievements, and trivialise their shortcomings (good if you are a salesman)

 

When it comes to trading, when ever you hear excuses, hopes, or denials you know there is trouble. The biggest check is the PL it does not lie.....it often also does not meet our expectations