The Year That Was

About this time of the year we get a raft of year in review style of articles in the popular press. They usually have a few common elements.

1. The year was (insert appropriate metaphor here)

2. Looking back it was all so obvious…..then why didnt you tell us this before the year began.

3. Next year we hope for (once again insert appropriate metaphor here)

4. Our predictions/guesses  for the forthcoming year are (insert vague astrology like forecast here with disclaimer so you don’t look like a dickhead in 365 days time)

If I were to offer up a single word characterisation of the year it would be fear. Not just in the technical sense as exemplified by a tool such as the VIX index but rather a true state of fear in traders that the world may have permanently changed. This fear has spread throughout markets from Goverments trying to make policy to stabilise the total cock up caused by the Greeks to the superannuants who are wondering how they are going to survive retirement with ever dwindling savings and contracting government support.

Fear is an insidious feature of trading – all traders hope for a market that is made up of low volatility but strong trend. We all want a market that just goes up with no sudden whipsaws or strange events blindsiding us. It is in these markets where the easy money is made. No trend and high volatility is a disaster as we have seen.

However, fear is an emotion of erosion – it erodes the confidence of traders in the integrity of the market and more importantly in their own abilities.

My feeling is that over the past year we have seen a build up of chronic fear or worry within professional traders. It permeates all thoughts and all actions on an everyday basis. Chronic fear is a motivation eater and stifles attempts of traders to move forward. As an example some markets have had reasonably good years but the overflow from the markets that are having crap years permeate a traders thinking. The statement I have heard a lot this year about not taking trades is – what if something happens like in such and such a market. This is in many ways a natural reaction – it is hard to quarantine this low level fear. Particularly when the world does seem to be coming apart at the seams.

Some of the things we worry about are important most are not. Many are outside the realm of a trader’s influence. To combat chronic fear drag you need to drag yourself back to the present – each trade has to effectively become a single moment in time where nothing is matters. There is no denying that this is a difficult undertaking but if trading were easy everyone would do it.