Market metaphors

This article on Farnam Street blog (up there as one of my favourite blogs, it is not only a market/economics/finance related blog):

How Metaphors Shape Our Thoughts And Decisions http://www.farnamstreetblog.com/how-metaphors-shape-our-thoughts-and-decision?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+68131+%28Farnam+Street%29

I am not a fan of describing the market with metaphors, at least not to myself. If my grandmother asks me something about the market (in between puffing on a pack or two of cigarettes and watching Judge Judy) I may well use a metaphor or two , they are often helpful when needing to convey something complex in less-complex terms.

And metaphors are probably OK for banter with other traders. For example, a colleague once described his day of FX trading in these terms: “I am lying here in a pool of blood”, humourously conveying a day where he had lost a fair bit of money.

The Farnam Street blog links to an article, here:
Is crime a virus or a beast? How metaphors shape our thoughts and decisions
http://blogs.discovermagazine.com/notrocketscience/2011/02/23/is-crime-a-virus-or-a-beast-how-metaphors-shape-our-thoughts-and-decisions/
The money quote is probably this one:

In a series of five experiments, Paul Thibodeau and Lera Boroditsky from Stanford University have shown how influential metaphors can be. They can change the way we try to solve big problems like crime. They can shift the sources that we turn to for information. They can polarise our opinions to a far greater extent than, say, our political leanings. And most of all, they do it under our noses. Writers know how powerful metaphors can be, but it seems that most of us fail to realise their influence in our everyday lives.

How is this relevant to traders/investors?

I am not going to speak for anyone else, only for myself. I am very careful when reading/thinking/formulating views/in the midst of trading to be aware of the metaphors in use in articles/posts/my head and how they may be impacting on my thoughts and actions.

For example, If I am reading an article that describes Bernanke as a ‘dunce’ and ‘shonk’ for ‘engineering’ a ‘false’ upmove on the S&P, (to be honest I would most likely be not reading an article that referred to Bernanke as a dunce etc., if I were I would be very likely indeed to stop reading it and move on) I might well find myself being less willing to buy the ES on a trade because in the back of my mind I don’t want to be associated with dunces etc.

So, I want to be aware of metaphors in trading because they may well help shape my thoughts and decisions. perhaps in a less-than-helpful way. I am inconsistent on this, though. Recently, on one of the days when the S&P was grinding (there’s one right there) higher I emailed a friend with the comment that the bears were being ground into paste. On the other hand, last night I posted this in a pre-cash update:

My models are telling me there are a lot of offers around this morning. A lot.
It has been a great overnight rally, for sure (talking ES here) … but for the pre-lunch cash session now I am going to have a bear bias.

I tried to be precise with what I was seeing – a lot of offers around – and I used common market jargon, but I try to stay away from metaphors when doing something important for myself, like formulating a basis upon which to approach the trading session. This post was really me establishing my strategic view for the next 2.5 hours, and I tried to make my talking/typing to myself as plain and clear as possible.

OK, so, like I said, I am not speaking for anyone else here, just myself. But in using metaphors in trading decisions, maybe ask yourself how useful they are. From that ‘money quote’ I referred to earlier, bolding and reformatting mine:

have shown how influential metaphors can be.
They can change the way we try to solve big problems ….
They can shift the sources that we turn to for information.
They can polarise our opinions to a far greater extent than, say, our political leanings.
And most of all, they do it under our noses. Writers know how powerful metaphors can be, but it seems that most of us fail to realise their influence in our everyday lives.

If metaphors can do these less-than-helpful things, how big a role do you want them to play in communicating with yourself about your trading? (“As little as possible” is my answer).

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