Animal fables for traders - the lessons

Let us look at the lessons of the previous post, because there are plenty of them!

What the stupid monkey teaches

One of our most basic experiences is that systems surround us and we live inside systems. Because of that we try to understand the system everywhere, even where it is hidden and we are simply unable to uncover it. That is why we can cling so stubbornly to useless trading strategies, assuming that we see into the underlying system, and refusing to accept that a strategy that works ad hoc really only works the way a stopped clock shows the right time twice a day.

What the mad pigeon teaches

Events being close together in time creates the impression that there is some connection between them. This is not necessarily true; in fact most of the incomprehensibly large number of events have no causal connection at all, regardless of how close together they happen.

The dancing pigeon shows that closeness in time can lead us into errors of a magnitude far beyond what we would be willing to accept. People say in their own defence that “there are no coincidences” - but there are, because a coincidence is not something without a cause, it is something that was not intended.

As traders we can hold serious superstitions and build elaborate rituals, in the belief that the hidden fabric of reality has revealed itself to us. If it really has, the result of that is stable, regular income, not a ritual of some kind.

What the cunning fish teaches

The cunning fish has one single trick: moderation. The angler builds on greed, on the fish wanting more and more, or wanting everything, and on it getting hooked as it moves forward intoxicated by that goal, ending up in the pan in the sizzling oil.

In poker, a professional starts with being able to stop. The amateur is carried away by their desires.

They have no self-control, they do not see clearly, and they walk into the trap as a matter of course. The same can be said of traders: almost a whole industry has been built on whipping up immoderate desire, and when a person sits in front of the monitor, they see the chart faintly but the Bugatti sharply, and they reach for it. Do that a few times and you end up dodging fares on the tram.