From Raindance To Pipdance |
By Boris Schlossberg |
Published
06/6/2009
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Currency
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Unrated
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From Raindance To Pipdance
My sister just came back from mainland China and upon her return to Florida was shocked to see the contrast between the obese Americans and the relatively thin Chinese. This is of course a common observation and often leads to a never ending lament about the dominance of American fast food cuisine that has essentially turned this nation into a land of fat people. I certainly agree with the criticism of the American food culture but I think the obesity epidemic is also a signal of something else much more positive.
First, Americans are no longer unique in their fatness. The Brits are becoming fatter by the day and so for that matter are the French. A recent study of overweight teens from across the world basically shows a huge geographical skew with North America and Western Europe producing markedly fat children while Eastern Europe remains relatively slim.
At its core the obesity epidemic in the industrialized world is a sign of man’s total triumph over nature. The advances in technology have made food so cheap in the West that we can stuff ourselves full of calories at almost no cost. This near pornographic abundance of food is a testament to science’s ability to conquer the environment. No more need for the rain dance. No more offerings to gods. We control the future.
This belief in control has become the philosophy of the modern age. As societies and as individuals we now approach every new problem with an engineering mindset. There is no crisis that we cannot “engineer” away. From electrical engineering, to financial engineering, to behavioral engineering at its core the glory of modern civilization is really the worship of engineering.
Unfortunately when it comes to trading engineering fails miserably. The irony of trading is that it is a discipline that relies on the most modern of technologies yet contains all of the chaos, uncertainty and superstition of the ancient world. As I sit at my desk surrounded by six screens, multiple computers and instant media feeds from around the globe, I still cannot with any degree of certainty know if my trade will turn out to be profitable. That’s why the engineering or to put in trading terms “the algorithmic” approach has never made money in the long run. Take a look at the most successful hedge funds over the past twenty years and they are all discretionary in nature, Soros, Jones, Steve Cohen – all managers that have never relied on any robotic model to make their trading decisions. The only exception to that rule is Jim Simmons’ Renaissance fund, but the public version of that fund which claims to use the same algorithmic techniques has performed so poorly that it makes me believe that for all of his hundreds of Phd’s sequestered in Long Island, Simmons is doing something less than scientific to garner his returns.
At its core trading is always more art than science. Furthermore, the unpredictable nature of the game (look at the move in the pound last Thursday) quickly turns the most modern of men into the most superstitious of our ancestors. When we feel we cannot control the future we quickly seek psychological crutches.
I for example developed a maddening new belief that our trades will not hit our first target (T1) if I am staring at the screen. Therefore, when price action comes within several pips of the target I leave the computer, go for walk, go get a cup of coffee, go work out – anything but watch the price action. I’ve dubbed this my “pipdance”, and while I completely understand the absurdity of my actions I refuse to change them, which I actually think is ok. Surrounded by all this technology we often are fooled by the illusion and arrogance of control. Having some superstation infuses us with some humility of our ancestors and reminds us daily of the volatile, primitive forces that truly rule this game.
Boris Schlossberg serves as director of currency research at GFT, and runs bktraderfx.com.
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