Sunday, July 16, 2006

May You Stay Forever Young

What prompted this Alphaville or Bob Dylan moment (actually, for the record, as I'm writing this The Sisters of Mercy are playing "More", which equally suits the occasion) was an exercise I tackled this weekend. I decided to research how I would make trading decisions if I *had* to place trades in the first few minutes after the open using only the most recent market data. Of course, this meant that I had to toss out all my historical research, indicators, etc. and figure things out from scratch.

It was really hard.

But it was amazing how I ended up seeing patterns in high frequency data that I would never have seen otherwise.

It even gave me an idea for a promising trading concept, based on figuring out the early odds of trending vs. mean reversion.

But it was really hard.

Of course, not everyone tackles these kinds of projects on weekends. Some people get by with a little understanding; some people get by with a whole lot more.

If I have one fear, it's the fear of ossification. It's that body snatchers fear that somehow, someway you'll wake up and become like everyone else. You'll think the same thoughts you always thought, visit the same places, listen to the same music. Imperceptibly, you'll have become old. Not in years, but in spirit.

I recently bought a new car. There were lots of great luxury cars on the market, with incredibly comfortable rides. So, of course, I bought the car with the performance-tuned suspension, rear wheel steering, and torque-at-every-point-in-the-curve. Not a comfortable car at all.

Hard to drive well.

Hard, like figuring out what to do in the markets based on several minutes of data.

But there's something to be said for operating out of the comfort zone. Novelty keeps you fresh. Throwing away the old, and facing the world with an empty mind is a bit scary, but it's the only thing that lets new things inside.

There's a great quote from a book I'm reading this summer: Lila, by Robert Pirsig:

"If you want to drink new tea you have to get rid of the old tea that's in your cup, otherwise you cup just overflows and you get a wet mess. Your head is like that cup. It has a limited capacity and if you want to learn something about the world you should keep your head empty in order to learn it. It's very easy to spend your whole life swishing old tea around in your cup thinking it's great stuff because you've never tried anything new, because you could never get it in, because the old stuff prevented its entry because you were so sure the old stuff was so good, because you never really tried anything new...on and on in an endless circular pattern" (p. 25).

Getting old is that endless circular pattern, the point at which you're snatched for good and forever entrenched in your comfort zone.

Better to be forever young: to always be willing to operate outside of comfort, encounter new experiences, and learn new things. But that takes an empty mind and a willingness to throw out old tea.

Back when I was in school, our teacher made us tell the class which animal we'd like to be.

Some students wanted to be dogs, others cats, some horses.

I said I'd like to be a moth, because moths burn themselves out chasing distant lights. That pretty well brought the exercise to a halt.

But hey, hey, my, my, Neil Young would have understood.

May you never rust.

May you stay forever young.

6 comments:

Sienna said...

Great post! I did a similar experiment using only one day charts from randomly chosen stocks. My goal was not to pick winners, it was to predict the next day's movement - whether it be a loss or gain. Hard work, but rewarding. I was able to better tune into my own perception of chart data. It helped me identify patterns and flaws in movement which I might have overlooked if I had focused only on narrow rules for picking winners that don't account for those weak spots. So now I do this on a regular basis to keep my skills fresh and focused. It's incredible what a person can learn when they aren't chasing profits.

Brett Steenbarger, Ph.D. said...

That's a really excellent point, fugue; thanks for the comment. When you take the P/L issue off the table, it opens the door to simply observing markets and picking up patterns. I find replaying past market days to be a great way to keep sharp on the pattern recognition--

Brett

Hawkmoon Nine said...

I think I am ahead of the game since my head is pretty empty already...

:)

Brett Steenbarger, Ph.D. said...

And I'm ahead of the game, hawkmoon nine, because I stay immature no matter how old I get--

Brett

Roshigary said...

That quote from Pirsig is originally an old story about a professor who visits a Zen master in order to learn about Zen. The professor keeps talking and talking, trying to display just what his understanding is, while the ZM poured tea. Not stopping when the cup was full, he kept pouring while the tea overflowed the sides of the cup. The professor could contain himself no longer. "Stop! Can't you see that the cup is full?" The ZM replied, "Just like this cup, your mind is filled with your perceptions, your judgments, your opinions. How can you hope to learn anything unless you first empty your cup?"

Shunryu Suzuki put it this [somewhat chopped for clarity] way: "In the beginner's mind there is no thought, 'I have attained something.' All self-centered thoughts limit our vast mind. When we have no thought of achievement, no thought of self, we are true beginners. Then we can really learn something. So the most difficult thing is always to keep your beginners mind. This is also the real secret of the arts: always be a beginner. Be very careful about this point." (Zen Mind, Beginner's Mind, p. 22)

Moths:

the lesson of the moth

i was talking to a moth
the other evening
he was trying to break into
an electric light bulb
and fry himself on the wires

why do you fellows
pull this stunt i asked him
because it is the conventional
thing for moths or why
if that had been an uncovered
candle instead of an electric
light bulb you would
now be a small unsightly cinder
have you no sense

plenty of it he answered
but at times we get tired
of using it
we get bored with the routine
and crave beauty
and excitement
fire is beautiful
and we know that if we get
too close it will kill us
but what does that matter
it is better to be happy
for a moment
and be burned up with beauty
than to live a long time
and be bored all the while
so we wad all our life up
into one little roll
and then we shoot the roll
that is what life is for
it is better to be a part of beauty
for one instant and then cease to
exist than to exist forever
and never be a part of beauty
our attitude toward life
is come easy go easy
we are like human beings
used to be before they became
too civilized to enjoy themselves

and before i could argue him
out of his philosophy
he went and immolated himself on a patent cigar lighter
i do not agree with him
myself i would rather have
half the happiness and twice
the longevity

but at the same time i wish
there was something i wanted
as badly as he wanted to fry himself

- Don Marquis


Lights:

My candle burns at both ends;
It will not last the night;
But ah, my foes, and oh, my friends--
It gives a lovely light!

- Edna St. Vincent Millay

Brett Steenbarger, Ph.D. said...

Roshigary, those are brilliant additions to my post. Thank you so much for adding beauty as well as wisdom. Do stay in touch--

Brett