Luck

It irritates me when people claim to be (un)lucky, as if they have a supernatural gift (or curse) which allows them somehow to circumvent the laws of probability. For despite the ubiquity of this misguided superstition, luck is simply that: applied probability, often with skill and diligence (or the lack of it) lurking not far behind.

Of course there must be the occasional person who enjoys an “incredible” streak betting on the nags, just as a coin will sometimes produce an “amazing” run of nine or more heads in a row. But they are not gifted, at least in any mystical sense – though they may well be deft at analysing form, for instance – merely perched further towards the end of the bell curve.

Indeed, when humans are asked to write down a sequence that represents a realistic series of coin flips, they invariably underestimate the frequency and extent of these runs. For instance they might write HTHHTHTTHHTHTHT whereas something lumpier, such as HHHHTHHHTTTHTTTTT would be more representative of reality.

Similarly, someone killed by a falling durian might be considered dreadfully unlucky (once the inevitable guilty chuckles had stopped) but is simply the victim of a remote probability that they chose to increase significantly by standing under a tree that kills several unfortunates a year. (The Latin name for durian means “smells like a civet cat” by the way. ) Meanwhile someone must win the lottery – no luck in that, it’s eventually a 100% certainty – while every other entrant is taxed on their failure to grasp how pathetically minuscule are the odds of a pre-chosen person winning.

People who consider themselves lucky generally have a more positive outlook on life. Good events are highlighted in their memory while bad events fade. A positive outlook will be reflected in their response to certain circumstances and availability to spot and act upon opportunities; the opposite is true for the “unlucky”. This has a cumulative effect which is bad news for the “unlucky” person because they are likely to become increasingly aware of every bad event and increasingly dismissive of good ones, falling into a vicious spiral of irrational “the fates must really have it in for me” paranoia. This type of person often fails to take responsibility for his own actions, preferring instead the easy cop out of fatalism, or worse, puts their faith in astrology. This doesn’t usually help.

Please note I’m not claiming we aren’t prey to chance. Of course we are, every single day. There are myriad inflection points which no amount of personal governance can alter. For instance, we have no control over the circumstances of our birth and the subsequent privilege (or lack thereof) granted to us by them. As a passenger, we can do nothing about the aeroplane whose engines simultaneously fail, except perhaps choose a seat in which one is statistically more likely to survive. But at no point does chance take the form of a guardian angel.

“Luck is what happens when preparation meets opportunity” – Seneca

I note that no fewer than 380 lucky horseshoes were sold on eBay in the last 15 days. Sadly I doubt it was cheaply to meet the needs of 95 barefooted nags.

Hidden intent in trading

During my career as a heartless futures trader, I’ve wasted about four years trying to decipher the intent behind every price fluctuation and in doing so disappeared down a number of fruitless though mildly interesting bunny tunnels. It’s a natural thing to do, as the basic mechanics of trading ultimately become tedious and unfulfilling, at the very least in an intellectual sense, so of course one tries to go deeper and deeper to squeeze more meaning from the motion, indeed the profession as a whole. Or hole.

Now I’m down to one free web-based chart and have let it all go, it’s such a relief. Four monitors, 85 charts with various pointless divisions of time, range and volume, bid/ask order book overlaid with pit noise, Tick, Vix, put/call open interest, A/D and Trin. What on earth was I doing, apart from muddying the water and creating diversions to avoid facing the simplicity that was always there. I suppose it’s kinda hard to accept that an innocent child with the proverbial crayon would probably do the job better, especially for the inquisitive male ego “But… but … you mean that’s all I have to do? Can’t be right. So let’s misovercomplexify it” as Bush might say.

Notwithstanding I think basics still need to be grasped: the formations and background levels of commitment and emotion that manifest as, for instance, an even-handed fierce fight; a non-commital can’t be bothered to fight; woah that hurt and I grimly held on but now it really hurts capitulation; directional grind, whippy uncertainty etc. Vague levels of view (or lack of it) and positioning, but beyond that I no longer care why anything is happening outside of the nebulous bigger picture. Perhaps it gets more exciting when you can see the less obvious coming, but you don’t need to. Pursue another (parallel) career if you want creative rewards, enlightening explanations or a sense of having produced something tangible.

Accept that for the market to work it needs to occasionally misdirect – savagely – often during a dull moment (biggest moves often come out of these) but that it is, yes, generally quite obvious. Look at [redcated] on Trade2Win nonchalantly sweeping pips into his basket with nowt more than the outrageous simplicity of price. Draw a few simple lines, exercise patience and hit those small areas of high probability again and again. That’s all we can do. Thus it must follow that battles will indeed be fought in these obvious areas, as that’s where the seasoned money will always be. It cannot be any other way. Our money, playing the waiting selective game. Not their money, cause they’re impulsive, impatient, clueless, adrenaline diet disciples, or so rumour has it.

The disillusioned trader can allow their other interests to answer and fulfil the needling question ‘but surely there is more’. Without doubt there is, but I haven’t found it in trading. Indeed the searching obscured the very thing I didn’t need to look for.

Quotations

  • Happiness is equilibrium. Shift your weight. Equilibrium is pragmatic. You have to get everything into proportion. You compensate, rebalance yourself so that you maintain your angle to the world. When the world shifts, you shift. (Stoppard)
  • He was a dreamer, a thinker, a speculative philosopher… or, as his wife would have it, an idiot. (Douglas Adams)
  • Ensanguining the skies,
    How heavily it dies,
    Into the west away;
    Past touch and sight and sound,
    Not further to be found,
    How hopeless under ground,
    Falls the remorseful day.
    (A.E. Housman)
  • I have written you a long letter because I did not have time to write a short one.
  • Seek freedom and become captive of your desires, seek discipline and find your liberty. (Frank Herbert)
  • Not being able to govern events, I govern myself. (Montaigne)
  • To predict the behavior of ordinary people in advance, you only have to assume that they will always try to escape a disagreeable situation with the smallest possible expenditure of intelligence. (Nietzsche)
  • “Why is it,” he said, one time, at the subway entrance, “I feel I’ve known you so many years?”
    “Because I like you,” she said, “and I don’t want anything from you.” (Ray Bradbury, Fahrenheit 451)
  • Everyone has talent. What is rare is the courage to follow the talent to the dark place where it leads. (Jong)
  • Experience is a hard teacher because she gives the test first, the lesson afterwards. (Sanders Law)
  • Too many people are thinking of security instead of opportunity. They seem more afraid of life than death. (Byrnes)
  • We are going to die, and that makes us the lucky ones. Most people are never going to die because they are never going to be born. The potential people who could have been here in my place but who will in fact never see the light of day outnumber the sand grains of Arabia. Certainly those unborn ghosts include greater poets than Keats, scientists greater than Newton. We know this because the set of possible people allowed by our DNA so massively exceeds the set of actual people. In the teeth of these stupefying odds it is you and I, in our ordinariness, that are here. (Dawkins)
  • from Withnail and I
    Monty:
    Get that damned little swine out of here. It's trying to get
    itself in with you. It's trying for even more advantage. It's
    obsessed with its gut - its like a rugby ball now. It will die,
    it will die! [He storms around ineffectually.]
    
    Withnail:
    Monty, Monty.
    
    Monty:
    No dear boy you must leave, you must leave. Once again
    that oaf has destroyed my day.
  • The point of marriage is not to create a quick commonality by tearing down all boundaries; on the contrary, a good marriage is one in which each partner appoints the other to be the guardian of his solitude, and thus they show each other the greatest possible trust. A merging of two people is an impossibility, and where it seems to exist, it is a hemming-in, a mutual consent that robs one party or both parties of their fullest freedom and development. But once the realization is accepted that even between the closest people infinite distances exist, a marvelous living side-by-side can grow up for them, if they succeed in loving the expanse between them, which gives them the possibility of always seeing each other as a whole and before an immense sky. (Rainer Maria Rilke, Letters to a Young Poet)