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Hi list,
I was asked to write a short metaphor about beliefs in trading. I wrote the
following, hopefully it is of interest to some.
Take care,
John
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In the summer time a young boy from the country visits his rich uncle in
New York City. His uncle lives in a very nice apartment building
overlooking Central Park on the 56th floor. One evening the decides to run
up the stairs to see how long it takes him. A short time later the boy
arrives on the 56th floor breathless, and hot. Going outside onto the patio
to cool off in the evening breeze he is bitten by a mosquito! The boy goes
inside, and ask his Dad “Why are there mosquitoes so high, why aren’t they
all down by the street?
After all the young boy expended a lot of energy in climbing the stairs,
why would the mosquito expend so much energy to fly so high when they could
lazily feed off of the people on the sidewalk?
Knowing how hard it is to climb 56 floors of stairs the boy has a belief
that the mosquito likewise must also expend extra energy to fly so high.
The reality of course is that the mosquito could of easily drifted up that
high on an updraft of hot air with no energy expended doing so. If the
mosquito did flap his wings till he arrived at the 56th floor patio, his
expenditure of energy to fly so high is basically the same as if the
mosquito had flown an equivalent horizontal distance!
Trading is the same way, traders are not competiting against each other for
the “pot of gold” – but rather they are competing against their own
internal beliefs and perspectives. It is these beliefs that are preventing
them from seeing the reality of the marketplace. Just as the boys beliefs
prevented him from realizing that the mosquito did not huff and puff to
arrive at the 56th floor.
The life expectancy of the boy is many thousand times that of the mosquito,
the amount of energy expended by the boy if measured in BTU’s is also many
thousands that of the mosquito. So is it with trading, the more capital you
are trying to “move” in the market the more energy you must expend to
arrive at the same percentage return as a trader with less money. Similarly
just as the time horizon of the mosquito in arriving at the 56th floor
patio was a sizable percentage of his life expectancy, and the percentage
of time expended by the boy in racing up the stairs was a small percentage
of his life expectancy.
The amount of energy expended to gain this “attitude” is proportional to
the life expectancy of the “climber”. If preparing to get long is similar
to preparing to climb the stairs - then the life expectance of the
“climber” will be directly related to the amount of energy expended in
preparing for the climb. The most successful traders expend a lot of
energies in preparing strategies for their trades.
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as this might be published in the future I must say:
All Rights Reserved by John Hayden 2002
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