In the latest issue of the New Yorker, Malcolm Gladwell writes about drinking challenging the commonly held belief that frequent consumption of large quantities of alcohol will inevitably lead to addiction and alcoholism related diseases. Gladwell provides two very disparate examples that shatter the consumption-to-alcoholism myth. In one he shows how the Camba people of Boliva, high up in the Andes mountains would drink a local alcohol beverage of 180 degree proof provenance every single weekend yet experience none of the social, physical or emotional problems we associate with that kind of harsh drinking. Closer to home, he focuses on the drinking habits of the Italian American community of New Haven in 1950’s which involved the consumption of alcohol not only on a daily basis, but literally from morning on through the day and yet again with virtually none of the long term negative effects we expect from such behavior.

I must admit that as teetotaler myself (I am one of the few Russians who simply has no stomach for the stuff) I found Gladwell’s article fascinating. It turns out that it is not how much you drink, but rather how you drink that really matters in the end. Both groups followed highly ritualized processes when it came to drinking. The Camba would sit in a circle and do shots each other in what effectively was an elaborate drinking game. They would only use one bottle at a time and only the person who was making the toast and the person he was toasting would share a single shot of the hard liquor before the process repeated itself down the line. The Italian American’s of 1950 New Haven also had their own rules. Typically they would only drink wine and then drink primarily as an accompaniment to their meals and even further would generally limit the intake to just one glass per sitting. Therefore, although many members of that community drank from dawn to dusk their consumption of alcohol was just as ritualized as the Camba and similarly they suffered none of the problems of alcoholism.

The culture of drinking therefore is far more important than the act itself. In both cases the people involved created an elaborate set of rules that allowed them to practice this behavior with a great degree of safety. The Camba would only stage their “benders” once a week on Saturday night and would never drink during the work week Furthermore, their highly elaborate toasting rituals would effectively ration the intake by both quantity and time allowing them to imbibe the vilest, strongest possible liquor without any long term negative impact. Although the New Haven Italian Americans drank in the exact opposite manner, they too imposed massive cultural rituals on their consumption by sticking primarily to wine and generally drinking only as an accompaniment to a meal.

I think that these little vignettes about drinking are not just amusing ethnographic anecdotes but very valuable insights to us as traders. Ask yourself – do I have a culture of trading? Do I have a set of ritualized rules that contain and control my behavior to protect my capital? For a very long time I myself did not and I must tell you that although I never drank, the similarities between binge trading and binge drinking were much too close for comfort. All too often I would trade just for the “action”, doubling and sometimes even tripling up on my losing bets with much too predictable consequences. In fact, I believe that the spiral down process of a trader and an alcoholic are almost identical in their manner and it is no surprise that many individual and professional traders often turn to drink when their trading implodes.

The key to both drinking and trading is cultural control and structure. Once I decided that I was only going to trade newsflow and stand down for the rest of the day my trading improved markedly I didn’t simply chase price in a mindless pursuit of profit but followed a well thought out plan each day. In essence I effectively created my own culture of trading without which we can never achieve long-term success.

Boris Schlossberg serves as director of currency research at GFT, and runs bktraderfx.com.