Tuesday, January 31, 2012

Zen and the Art of Trading

Came across this "lost" interview excerpt with an unnamed trader from Jack Schwager's New Market Wizards and I'd like to share it with you here. 

As Schwager explains in the intro to his "Zen and the Art of Trading" chapter, this wide-ranging, and rather philosophical, interview with a top trader had to be scrapped on fears it would alter the trader's image with his firm's corporate clients. 

Schwager asked this trader for permission to anonymously publish one interview excerpt, which he found particularly insightful. Here's a sample:  

"...I still don't understand your trading method. How could you make these huge sums of money by just watching the screen?

There was no system to it. It was nothing more than, "I think the market is going up, so I'm going to buy." "It's gone up enough, so I'm going to sell." It was completely impulsive. I didn't sit down and formulate any trading plan. I don't know where the intuition comes from, and there are times when it goes away.

How do you recognize when it goes away? 

When I'm wrong three times in a row, I call time out. Then I paper trade for a while.

For how long do you paper trade? 

Until I think I'm in sync with the market again. Every market has a rhythm, and our job as traders is to get in sync with that rhythm. I'm not really trading when I'm doing those trades. There's trading being done, but I'm not doing it.

What do you mean you're not doing it? 

There's buying and selling going on, but it's just going through me. It's like my personality and ego are not there. I don't even get a sense of satisfaction on these trades. It's absolutely that objective. Did you ever read Zen and the Art of Archery?..."

Let's note that the unnamed trader's view of zen in trading was partially informed by his reading of Herrigel's Zen in the Art of Archery. This leads me to the following thoughts and questions.

Some reviewers on Amazon have noted that Herrigel's understanding of zen and his tutelage in archery were rather muddled (for a variety of reasons). They went on to recommend reading Yamada Shoji's critique, "The Myth of Zen in the Art of Archery", along with Kyudo: The Essence and Practice of Japanese Archery for greater understanding of these topics. 

Kyudo Practice Japanese Archery book Onuma
Kyudo: The Essence and Practice of Japanese Archery

If Herrigel's pursuit of zen was fraught with misunderstanding, does this mean that some of the lessons drawn from his book are false? 

Was our mystery trader still able to connect with a Westerner's explanation of these topics, thereby fueling his own understanding? 

Can one really achieve a zen state of trading or being, and if so, did the unnamed trader somehow begin to approach this state, as described by his experience in the interview?

As a total (Western-born) outsider, I'll leave these questions open for you to ponder. 

Still, as this interview chapter is now 20 years old, I'd be interested to know more about the unnamed trader and the lessons he has learned in the intervening years. If nothing else, this brief and unique chapter of Schwager's book has certainly proven to be a catalyst for further reflection on the ideas of a "flow state" and trading/being. 

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Related articles and posts

1. What makes a great trader? Managing risk.

2. "Know Thyself" - Richard Russell on identity

3. Inner Voice of Trading: Lesson on ego and risk.

6 comments:

Slim said...

Really interesting. It's tough to tell whether this particular trader simply got lucky or not, but it brings up an important skill; intuition. Most traders don't have it, nor do they learn to trust it and so they NEED a system to be profitable. If this guy was truly successful it sounds like he found a way to tap and listen to his intuition. It's also interesting that he reverts back to paper trading until he get's back in sync with market.

Slim,
http://livinginvol.com/

David Shvartsman said...

Excellent point. I think harnessing intuition was/is key. This trader knew that intuition is not something to be blocked out, as some people are taught. Thanks.

Andrew Menaker said...

When I talk to a highly successful discretionary trader and ask them how they trade, what I often hear is them describing their intuition. They may talk about their method too, but its also about having a feel for the market combined with self-trust to be able to act on that feeling. I recently wrote a blog post about this here http://tinyurl.com/79runos

BTW, intuition is not mystical. Its a result of implicit learning, or unconscious pattern recognition.

Andrew Menaker, PhD

David Shvartsman said...

Great to hear more on this, thank you Andrew. Will check out your post.

Anonymous said...

BTW, intuition IS mystical, because to access it, one must suspend one's ego. Scientists like to "scientize" everything they come across.

Ben Johnson said...
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