The Flaws in My Character are the Flaws in My Trading

I’ve done some things I’m not proud of during my unemployed walk in the desert, unseemly things for an allegedly mature, married man in his mid-40s. Video games, one called Dark Souls in particular, began as a distraction from alcoholic temptation (the most seductive of time-wasting options for obsessives) and became the cause of extended, hand-cramping fugue states of extended concentration. The resulting guilt from this adolescent fixation was exacerbated by the games added “feature” of showing the number of hours played with each developed character. I decline to provide those numbers.

I’m not an idiot and there’s no way I’m going to prescribe a couple hundred hours of virtual swordplay, but the point remains that the game did teach me a valuable investing lesson – that the primary weakness in my character was also the weakness in my investing.

To understand how this happened it is important to note that Dark Souls is an intentionally, soul-crushingly difficult game, even for long-term gaming enthusiasts which I am not. The more difficult sections of the game (check HERE if interested –NSFW voiceover language) are more or less impossible to get through without the help of online videos and other forms of help. Even then, you can expect these sections to take anywhere from 25-50 attempts before success.

Every time I had trouble and went for YouTube help, the issue was impatience. The fact that I should have known this, impatience having been an Achilles Heel since gestation, shows a remarkable lack of introspection, an embarrassing blind spot in self-analysis. It is telling, though, that it took hours upon hours of frustration to realize what should have been obvious – I actually needed to be bludgeoned over the head again and again to learn the lesson. The psychological effort we expend to avoid recognizing our faults is incredible.

I took a vague swipe at a market outlook for 2012 in November’s “Cop Logic” and despite the Q1 rally; the environment is broadly what I expected. (I am not patting myself on the back here, any more than if I had doubled down on 11 and got hit with a face card – you play probabilities knowing anything can happen). The second that Chinese markets started falling and Spanish bond yields hit 2012 highs, I was tempted to jump in on the long side as a contrarian rather than let things play out. In a hubris-enriched attempt to get three months ahead of the market again, I would have made a highly costly, impatient, stupid decision. I checked up, realizing my investing tragic flaw was apparent.

Video games are a shameful waste of time, at least to the extent I was involved over the winter. My point in documenting the experience is to suggest that the most destructive tendencies of traders are likely apparent elsewhere in their lives, and that unsuccessful trades can offer a window into personality limitations that we all broadly share. Moreover, accepting and confronting these weaknesses is intensely counter-intuitive and our own subconscious will have us squirming away from uncomfortable conclusions.  It is not necessary to fruitlessly commit to a video game using the tagline “Prepare to Die”, but a closer examination of our tendencies outside of the financial world could provide useful, corrective guidance on trading and investment styles.

10 thoughts on “The Flaws in My Character are the Flaws in My Trading

  1. kris says:

    Impatience and Depression are two sides of the same coin, The coin is called is Unrealistic Expectations. Depression occurs when our set goals are not met. Impatience occurs when the time set to achieve our goals has expired.
    Every single person on the planet is wired to analyse him/herself. What matters is what is being done after the self-analysis. Three options:
    – Keep doing the same depressive and impatient deeds (hence: depression is a choice, check traders)
    – Continue self analysis as a goal to itself without doing anything (lack of will to change)
    – Stop the self analysis and change. First step: Forgive yourself and forgive those who wronged you.
    The rest is easy. Life is so, so, so beautiful.

  2. Jonas says:

    Isn’t patience something that’s mainly determined by hindsight though? One situation’s impatience is another situation’s decisiveness, and vice versa.

    Particularly in trading, when you don’t know how things will ultimately break beforehand, it seems difficult to pin the flaw on just that personal quality.

  3. […] Character flaws also show up in trading as well.  (Interloper) […]

  4. simonthornington says:

    So true. I had a foray into very committed video games, it lasted years. I believe the flaws that surfaced there, as well as in life and trading, were those of narcissism and hubris. Believing I was right, and the market would come around. Classic.

  5. Tim says:

    “The psychological effort we expend to avoid recognizing our faults is incredible.” The first time I studied for the CFA, the I blatantly avoided mock exams and question reviews because I knew I would get horrible scores and basically did not want to affirm that….you can guess how that turned out on the first time I sat for the test.

  6. Your post reminded me of a Steenbarger short discussion of trading as a vehicle for self-development.

  7. […] It also lets you step away from the obsessive nature many writers and market pros have so you can take an honest look at yourself … which helps your writing and your market decision […]

  8. I was tempted to jump in on the long side as a contrarian rather than let things play out.

    Yup, pretty much.

    Video games are a waste of time Well yes and no. Like fiction they can captivate you and take you to another world … without the harmful side effects of drugs. What’s so terrible about that?

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