Surfing and Trading, from Newton Linchen

January 3, 2009 |

For those who surf and trade, riding a big wave generates the same kind of adrenaline as that of a trader who enters a large position in a volatile market. It makes me remember last October. I decided to spend the month only day trading, as the volatility was increasing.

I found something interesting: every time I entered a futures position, my heartbeat increased strongly. I could feel it in my veins! (One particular time –I swear I will never do it again! — I was trading so leveraged that I really felt like I had adrenaline pumping all over my body, and I felt I could break a window's glass just by pointing my fingers at it with focused mind…)

As I have a background in Physical Therapy I understood that too much adrenaline for a sitting body wasn't quite good. So I decide to see a cardiologist.

He immediately asked for an exam which consisted in a portable electrocardiograph device I should use for 24 hours. Ok. No problem. I should point in a notebook whether I was in a moment of tension, stress, whatever.

So I went to trading in the Monday of October 6th.

My "normal" heartbeat was 68, 70, 80 per minute. When I entered a trade, it immediately rose to 130! (Trading can really accelerate your heart.) This repeated every time I entered a position while in the exam. The doctor prescribed more exercise (any exercise would be good) as I gained some pounds after pursuing trading as a full time commitment. (If someone could lose weight thinking I would be as slim as Gandhi).

One of my all time disillusion was to perceive that I really fear big waves and I am truly a hot-dog surfer. So I would never, ever, ride a big wave.

At trading I am still paddling at waves way over my head. Sometimes.

Steve Ellison writes:

I just finished Blink by Malcolm Gladwell, a book about instantaneous judgments. One chapter of this book analyzes policemen who shot dangerous suspects. One policeman confronted a man who was holding a gun to the head of the policeman's partner. The gunman muttered an expletive and began to turn his gun toward the intruding policeman. For this policeman, time seemed to slow down. He felt his finger squeeze the trigger of his gun and saw the bullet hit the gunman. He fired three more shots and watched them all hit before the gunman fell. The next thing he knew, he was standing over the gunman, but had no recollection of having walked. He had not heard the shots his partner had fired.At a heart rate of 115-140 beats per minute, Mr. Gladwell writes, the brain intensely focuses on the perceived threat and shuts out extraneous information. However, if under more extreme stress the heart goes beyond 140 beats per minute, the brain narrows its focus so much that it misses important details and makes errors in judgment. Many police departments are making it a policy not to engage in high-speed chases because the chases put such extreme stresses on officers that their judgments are impaired. Three of the worst urban riots in the U.S. in the last 30 years resulted directly from the actions of police officers after high-speed chases, including the Rodney King case.In the rest of the book, Mr. Gladwell writes about some astonishing examples of "rapid cognition". A marriage counselor has a record of predicting, with over 90% accuracy, whether a couple will still be married in 15 years by watching them talk for 15 minutes. Several art experts instantly judged a Greek sculpture bought by the Getty Museum as a fake, while the Getty spent 14 months investigating the sculpture and concluded wrongly that it was genuine.

There is a chapter about Paul Van Riper , a retired U.S. Marine general who reminds me of Jack Aubrey. He is a fighting general who does not share the conceit of some military thinkers that the fog of war can be lifted by better communications and more data. In his view, data collection and analysis are fine before the battle, but worse than useless while fighting.Playing the part of a rogue Middle East leader, General Van Riper inflicted heavy losses on the American team in a large 2002 war game, partly by using low-tech communication methods (e.g., couriers on motorcycles) that were impervious to the American side's strategy of knocking out or intercepting electronic communications. He gave his unit commanders authority to make any decisions they wanted to in combat situations. At those moments, he wanted the commanders focusing "down" (on their units) rather than "up" (on their superiors). Mr. Gladwell notes that the thinking styles of military officers and commodity floor traders are strikingly similar.

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Surfing and Trading, from Newton Linchen

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