Risk Taking: 7th Secret

There are times as a trader when you are having a bad run. One loss leads to another and another….and another. After a period of time, even the most battle hardened veteran may find himself putting his balls in the desk drawer when he sits down at the screens.

Daniel Kahneman’s excellent: Thinking Fast and Slow, provides an assessment of system 1 and system 2 and their roles in your behavior and thought process. System 1 is the reactive, the intuitive, the low energy consumption function. System 2 is the rational, deep thought, energy intensive function. In a slump, you are heavily weighted to system 2. In trading, you need to be able to shift and work frequently in system 1.

It is hard to snap out of this mindset and get beyond the slump. It can be done. Here is the way to reignite your brain and sharpen your focus and reignite system 1 functioning: extreme sports.

I choose mountain biking and skiing as my sports of choice. These provide a necessary outlet for pent up aggression from a trading environment and relax or sharpen the mind. Trading after all is an intensely biological and psychological activity, meaning that a person must constantly train to adjust, interpret and overcome personal biological and psychological cues in order to make good trading decisions and overcome bad ones.

Extreme sports are therefore an essential part of the job.

When you go “freeriding” on a mountain bike, you are choosing a 6 and 6 dual suspension rig as your tool of choice. That means six inches of travel front and back (This is not a sexual reference. Yes I know you were going there.)

The ride typically consists of a long grueling switchback climb up the legendary Fromme Mountain, on Vancouver’s North Shore, to a resting spot at the entrance to the fabled 7th Secret. This climb is an hour and 15 minutes of pain and thought inducing (why the fuck am I doing this?) system 2 exercise.

You put on your body armour. Have a snack. Lower your seat. Adjust the suspension. Reduce the air pressure. Take a deep breath and you are good to go.

The entrance is sort of steep with some intimidating rocks along the way. For a novice, this is a scary scenario. For a veteran: a warm up. The minute you move to the trail head there is no deep thought. There is no “not another fucking loss…FUCK!” there is calm and relaxation. There is only system 1.

As you wind down the trail. Quick stops. Balancing to work tight corners. Tight corners to fast steep rock descents. Quick steep climbs on slick surfaces. Two by four ramps on a 90 degree angle between two trees. Sharp drops over logs, rocks and between trees. You react. You narrow your focus. You flow. System 1.

At the bottom of 7th you wind down the road to Pipeline, a blue black that is intensely physical with consequential descents. Ladder bridges galore. You are tired. Muscles aching. Thirst. Your breathing is heavy. There is no deep thinking. You are at one with nature. System 1.

After 2-3 hours in the forest you will be exhausted from the physical punishment; but your mind will be clear, sharp, focussed and elated. Your endless doom lifted as System 1, your intuition is reactivated. You are ready to go.

No more balls in the desk. You have your risk helmet back on. Balance is restored.

This is the 7th secret of risk.