July 25, 2011- Trading Abysses, Hitting Rock Bottoms and the Power of Vulnerability

You’re probably not stressed with the markets if you’re fairly new who never suffered a handful of losses.  However, if you’re not new, you may have thought about boxing to take away the stress inherent in trading.  You exercise, so as to keep your mind off of the markets.    I always remember Sean Mclaughlin’s thoughts when he once said that trading is not fun for most professionals.  He even went so far as to say that  trading needs to be boring and systematic enough to be mechanical, especially for traders who orient their systems with technical tools alone.  It’s easier to cut losses, when you’re numb with the figures, and just see the loss as part of the game.  Its the amateurs who normally see the markets as such an exciting whiff every single day, which complicates trading in the first place.

At least for me, charting dulls the senses, if you do it the whole day, every single trading day for years, it also numbs the mind.  This is probably the reason why writing, reading different news,emails,tweets and links from a community of fellow market junkies generally fills my day with delight.  My day doesn’t seem to be complete without scribbling notes, here and there.    Not only have I been more informed and able to trade better, I’ve gained some friends too in the process.

Every once in a while, I encounter a few trading books and articles to which I can relate to.  Let me share to you Stuart Walton’s story.

In Jack Schwagers’ Interviews with Top Traders, he dished out the following:

Stuart Walton’s career as a trader is marked by a string of contradictions and paradoxes.  He wanted to be an artist or a writer; he became a trader.  Though he valued academics and disdained the financial world, the markets became his profession.  He once hated trading so much that he awoke feeling that he couldn’t do it for another day and quit his job that morning; several years later, the markets were his endeavor and passion. His initial forays into stock trading were marked by such ineptitude that he nearly went bankrupt, yet he subsequently became so skilled that he more than doubled his money annuallyWalton was relaxed and outgoing. We talked for five hours straight without interruption. The time passed quickly.

For a full writeup of Jack Schwager’s interview with Stuart Walton- Please read it here.

_______

When I was fairly new at trading, I literally thanked the Lord whenever the US market indices were up, and as absurd as this may now sound, I used to believe in making money every single day.

When a stock moved significantly that day, I thought I could have rode that %gain, had I only read the news article that mentioned about what was happening to that company (whether it was an earnings driven event, or something news related.), or did my charting homework yada yada yada.

If Stuart Walton was initially bankrupt in his first few years, I went into the same black place myself.  Am I a failed trader?  Yes.  Initially, I failed tremendously at it.  Have I recovered?  Well, I’m off my lows- if that’s good enough.

Of course you won’t believe me when I quote the favorite excuse of most failures in the world. “The addict needs to  hit the rock bottom before he can heal.”    I know myself.  I lived the idealism of my previous academic life.  While it’s exciting (and perhaps the only “exciting”) thing to have the responsibility of trading much money, especially if you’re a young guy, just barely out of your twenties hunting for your prey (both the female species and other endeavors in life).  At some level, instant gratification, excitement, sizzle and the comfort of knowing that lots of other guys have milked millions from this business are enough reasons why your net worth will go up in no time.  “If they can do it, surely I can”, so you say to yourself.  Don’t make me a fool, because at some level, I have that gambling urge and I satisfy my speculative trades as well.

My black abyss episode just taught me that salesmen could always make any story sound great.  Your guru is most often the best salesman because you trust him too much.  Beware.  The thought that because of some “gambling”,all-in shot I’m making, that I could lose everything that I had built up in savings for years really straightened me up for good.  Only it was too late, when I realized this.  I lost countless millions from either being too late in cutting my losses, too eager to take my profits, betting the ranch on an idea, getting whipsawed in my executions etc.

From that point on, I traded much better and just started to chip away at my losses.  I never went all in like a poker game with my portfolio.  I leave the all-in bets inside the poker tables and the casinos.  I never do it in my trading.

I woke up one day and told myself I didn’t want to worry about interest rates, Obama, Aquino, Wen, Cameron, Sarkozy etc.  I don’t want to worry about them for the rest of my life.  Eventually, after watching the markets for a long time, I looked hard on one of life’s crossroads and gave myself a measuring stick.  I gave myself X # of years, Y # of milestones to achieve and Z # of measures to prove or disprove whether I’m moving forward, or backward.  Portfolio value is merely one metric.  Performance is related to management of risk, taking appropriate risk levels (there is such a thing as too little), and providing the suitable trading style to each client.

I like the comforts of life, and for me, this business still seems one of the best ways to acquire that “good life”, despite the fact that I still wonder about my purpose (but this is another post).  I however, had to satisfy my creative side, and sought the combination of a financial job with my artistic interests through writing, re-learning digital arts, and pursuing my random interests such as algorithms and statistics.  Do not be surprised if I’m off doing some financial cartoons in this site, as I’ve always wanted to do it anyway.

In a way, reading Stuart Walton’s philosophy reads very much like mine especially when he said “My philosophy is to float like a jellyfish and let the market push me to where it wants to go.  I don’t draw a line in the sand and say “this is my strategy and I’m going to wait for the market to come to me”.  I try to figure out what strategies are working in the market.  One year- it’s momentum.  Another year, it’s value.”

I guess I’d like to end this post with Brene Brown’s video “The Power of Vulnerability”

Here, she said that when people are asked about love, belonging and connections, people normally talk about breakups, exclusion and disconnections.  Shame is the fear of disconnection.  “I’m not good enough, I’m not smart enough, I’m not enough.”  However, if you totally deconstruct shame, in order for a connection to happen, you need to be seen, really seen for who you are (flaws and imperfections).  The fear that we are not worthy of connection, is the only variable that is setting us aback from all the rest.  It is that belief that we are unworthy.

Courage comes from the rootword cor- which means heart.  Hence coronary diseases, corazon aquino, cory etc.  The courage to embrace your vulnerability is opening yourself up with your imperfect stories.  What makes each person beautiful is our vulnerability.  When we are willingly able to say I love you first, with no guarantees, with possible rejections, and when we are willing to invest in a relationship whether it will or won’t work out, when we breakdown which is just another word for a spiritual awakening, when we struggle, this is where the birthplace of belonging and of love exists.

We need to be open to the ideas of our failures.  It’s only when we know that we’ve failed as traders, that we’ll learn how to even begin.  Our greatest teachers, I often believe, are our greatest failures.  We are receptive and are in a tabula rasa state (blankspace), when we fail.  If this sounds too – Kungfu Panda Like – well, sometimes the Zen Master in me just happens to pop out.  🙂

I know the markets are honestly long setups galore, so perhaps talking about trading abysses doesn’t quite fully come into the market climate template.  We’re working on a base to possible new highs, but I figured I’d share stories of stress in the markets, of burnouts etc which will eventually come sooner or later.

“When you enter the stock market, you are going into a competitive field in which your evaluations and opinions will be matched against some of the sharpest and toughest minds in the business.  You are in a highly specialized industry in which there are many different sectors, all of which are under intense study by men whose economic survival depends upon their best judgment.  You will certainly be exposed to advice, suggestions, offers of help from all sides.  Unless you are able to develop some market philosophy of your own, you will not be able to tell the good from the bad, the sound from the unsound.”
– Edwards and Magee

“The fresher and more original the ideas you bring to the table, the more interesting you become both as an individual and as a storyteller.”

– Vincent Sandoval, Filipino filmmaker-actor (He recently got his film in Locarno fest)

Despite the markets being competitive, at the end of the day, each one will have their own interesting stories to tell, I’d love to hear those stories , if you’d care to share in comments please.

-Faceless Trader

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4 Responses to July 25, 2011- Trading Abysses, Hitting Rock Bottoms and the Power of Vulnerability

  1. Quite a long post! classic ^^
    I haven’t quite absorbed everything yet but somehow while reading it, it made me think whether you’ve had days where in you made buy/sell orders just to satisfy your boredom for the day and feel like you’ve done something worthwhile for that day. It has happened to me! *guilty!*

    Like

    • Of course, That happens to me every time. In order not to feel “bored” —which I know is not even a reason to even buy any stock, I will put on probe sized positions, even when the overall market is in a decline. It’s a bad habit, but of course I am guilty.
      -FT

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  2. Pingback: Market Wizards (Famous Traders) |

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