Do superstitious traders lose or make money?

It’s summer 2007 and I’m calling on my latent supernatural powers to rescue a dodgy trade.

“If it goes in, this market’s moving up and I’ll be fine.”

I’m perched on the edge of a chair talking to myself, rolling paper balls and lobbing them through the air aiming for the bin in the corner of the office.

This one bounces off and onto the floor.

“Damn! OK, best out of three… If the next two balls go in the bin the trade will definitely work out good…”

The Bond futures trade I’d put on the previous day had slowly  moved against me. Now this was a heavy-duty market. It ticks at $31.25 and it’s not unusual to see volume at each price level a couple of thousand contracts deep.

It means there were a lot of big players on the prowl, but when there’s no momentum driving the market, the sheer weight of all that resting volume makes it move like wading through syrup.

(Imagine hand-pushing a car from a standing start and you’ll get the idea. Tough to do from a standstill but once you get it rolling it goes under its own momentum.)

So the situation was particularly torturous.

My stop loss was within striking distance and I knew there was little chance of a miraculous break higher. Not in these dull conditions. And the slow drip, drip, drip of sell orders pecking away at the bid made it seem all the more personal…

There was just no logical reason for the market to make this half-hearted push lower.

Why the hell were they selling here?

Can’t they just leave it until a bit of news hits?

At least then I’d have half a chance of a move in my favour.

But no, down it goes.

Takes an hour to move 3 ticks which delays the agony, but selling pressure is unmistakably there.

So there was only one thing left to do: wipe the beads of sweat from my brow and try a bit of magic.

When in doubt get the spellbook out

And that’s where you find me, rolling up paper balls and seeking reassurance the spot where they land can somehow influence the outcome of the trade!

Isn’t it strange how even the most cynical will defer to a higher power without hesitation in times of distress?

You hear of tough battle-hardened soldiers – complete atheists – suddenly finding God when pinned down under incoming fire.

But you won’t hear any criticism from me.

Whatever it takes to get you through the tough times is fine as far as I’m concerned.

I can’t even remember the outcome of that particular trade (probably a loser from the way it was shaping up), but I vividly remember doing the paper ball thing.

I’ve just thought of another amusing occasion, more of a personal one than a trading one…

The tale of Cupid’s tractor

I was still in my early twenties, on my way to work in the car, and feeling distraught.

I’d done something spectacularly foolish to upset my girlfriend. She wasn’t answering my calls and hadn’t been in touch with me for days.

(And this was before the days of mobile phones and text messaging. If you were waiting for someone to call, you literally hovered over the landline phone waiting for it to ring, picking it up every 15 minutes to check the thing still worked. Remember those days?)

So I’m driving along, feeling miserable, not knowing whether the relationship is on or off, and I remember thinking:

‘Please! Just give me a sign, let me know where I stand’

Lo and behold (don’t laugh), a tractor pulled out of a gateway in front of me so I had to stop the car.

On the back of it was some kind of ploughing attachment, but it was the bright yellow connector that linked the plough to the tractor – the coupling or whatever you call it – that grabbed my attention…

‘That’s it! The connector is my sign! It means we’re going to stay together and sort everything out!’

It sounds like the ramblings of a madman now but I did take some genuine comfort from it at the time!

So I don’t know… I guess I must be a bit more superstitious than I think.

I don’t wear lucky socks or have special trading rituals I go through or anything like that. But when the pressure is on I do catch myself reaching out to the gods.

And it came as a bit of a relief to discover I’m not alone…

‘Researchers, from the University of Texas and Northwestern University in Evanston, Illinois, believe that humans cope with feeling out of control by trying to impose order subconsciously – even in situations where there is none.

‘At a simple level, they demonstrated the principle by asking volunteers to look for images embedded in ‘snowy pictures’. Those whose feelings of control had earlier been undermined were more likely to claim to have seen an image, even where none existed.’ Source: bbc.co.uk: Illusions driving market havoc.

Sid the superstitious trading robot

A few years ago there was even an experimental equities trading fund running astrology and numerology strategies.

It was powered by a computer algorithm called ‘Sid the Superstitious robot’ and it had a few unusual approaches: it didn’t buy anything at all on the 13th of the month, steered clear of any assets with a 13 in the price, placed new buy orders around the new moon (good conditions) and lightened the portfolio around the full moon (bad conditions).

Of course, it did end up losing around 16% over a 12-month period, so maybe Sid’s crystal ball needs a bit of recalibration.

(It still out-performed many mainstream funds though!)

And to be fair, it was never meant to be commercially viable.

Shing Tat Chung says he created the Superstitious Fund ‘to poke fun at our irrationalities, but to do this in an engaging, thought-provoking way.

The idea of technology or algorithms operating with basic human behaviours appealed to me so the idea was to raise questions around our irrationalities and technology though the topic of finance.

We become more superstitious in times of instability, searching for patterns to give us the illusion of control. So with both economic and political instabilities, we are becoming more superstitious.’

So what do you make of all that?

It seems superstitious beliefs and actions could be a deep-seated psychological response – a piece of the core human operating code.

So how about you…

Do you have any trading superstitions or rituals?

Come on, you know all about my paper balls of desperation, so let’s hear about your own quirks. I’m sure we’ve got a fantastic selection of lucky charms, special pens, and magic underpants among Trader’s Nest readers.

Or maybe you have an unusual ritual you perform to get you in the right trading frame of mind?

Jump on over to the TN Facebook page now and let’s hear all about it!

Be Prepared: Market Moving Data Coming This Week (London Time)

Ha ha, I’ve just noticed the date on Friday!

Honestly, all the time I was writing about superstition I didn’t realise it was Friday 13th this week.

So come on, no excuses now, tell me if you’ll be approaching the markets any differently on Friday.

Go to the TN Facebook page now and leave me a quick comment: let me know you’re out there reading this.

Happy trading (especially on Friday) and I’ll catch you again soon…

P.S. Here’s a link to the Facebook page again. Leave me a quick comment about your own trading superstitions. It’ll take you less than a minute.