Daily Speculations The Web Site of Victor Niederhoffer & Laurel Kenner Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

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Department of Connections

2/29/2004
Kite-Flying and Trading
By J.T.

Last week I felt inspired and got my son's Triceretops/T-Rex kite out and took it outside w/ my two oldest children, they are 3 and 4.  Immediately I was amazed at my kids determination  to help me get the kite in the air.  After it was flying, and after letting them take turns holding and guiding it laughing, smiling and running the kite, I immediately saw the connection between the experience and trading.

(1) the closer you keep the kite to you, the less likely it is to fly, the more hesitation and apprehension to placing a trade the less likely it is to work

(2) the more string you give the kite the more volatility but the greater the experience, the more contracts you trade with the greater the volatility and the greater the risk/reward

(3) once the kite is high in the sky you suddenly realize that you don't really have control of it, the wind is the master; once you are in your trade other
factors of which you have no control over are taking over the reins

(4) when the wind stops the kite falls, when volatility and volume dry up it is harder it seems to make a buck

(5) it is a nice feeling to be a part of such a rewarding experience between man, machine, and nature; trading can be a rewarding experience with some of the same components

(6) when the kite begins to descend and crash it is hard to keep it from falling, all you have is patience and the hope that pulling brings it back up; when a trade goes in the opposite direction as your intentions it seems like there is little that you can do but be patient and get out when appropriate

(7) the Tricerotops/T-Rex kite is currently 40ft up stuck in a neighbors' nice elm tree, this is  equal to a lot of my losing trades that come back on my statements. Stuck without the ability to change. The results are glaring at me in the face, a humbling experience.