My belief is that we are born humans and made traders. We have some traits that work well in everyday life, but maybe don't carry over well to trading in a team. My intent here is to uncover words that imply. These are unfit for financial markets, namely words with momentum / inertia. There are many reasons why practitioners still speak with such implications in their language:
- Simple It's just like we talk in everyday life (Dow is going up = I am riding a bike)
- Powerful It helps you sell things (Gold is going up)
- Optionality You can argue that you meant something else (Yeah, gold went up)
Discrete Time
In everyday life, there is a bit of inertia to our actions. For example, if I choose to ride a bike I must stop the bike and get off before I can be not riding a bike. My bike is moving so my statement maintains its accuracy for a while. Similarly when I am cooking, my oven stays hot. If I tell you I am cooking, you can predict that in the next second, I'll still be cooking.
Continuous Time
With stocks and prices, this ability to predict does not follow so easily. I cannot make a factual statement that the DOW is going up or that gold price is rising. Instead, I have to be satisfied communicating merely that either went up or hit some price. If I say gold is going up, my words are actually making a prediction about the future price vs the last traded price (or the last quote).
If you make this mistake and you are new to trading, consider the upside of finer speech. Some products really do go on runs. You and your colleagues will know which ones if you save your words. You will also find yourself chasing missed opportunities less. And...
Hammertime
What can happen if we are not careful with our words? My friends at other trading firms provide great examples: say you hear something akin to "The dollar is going up," while (but really after) the dollar has a couple of upticks. Lets also say a guy named Micke Dafehr manages you. If you didn't buy the dollar and the dollar goes up, MD will say he told you it's going up. If you bought the dollar and it proceeds to go down, MD asks you later why your PL is so low downplaying this part and emphasizing your other trades. His "option" is worse than zero-sum for the team. Here is how:
Dollar up Dollar unch Dollar down
You buy I told you so Transaction cost Your PL is lower
You don't buy WHY NOT?! 0 pts You can agitate MD or not
You sell You're fired LISTEN MORE! Manager takes credit
Faced with such a prospect, you will prefer to act only on his decisions and not your own. You might feel less ownership, learn less, and have less motivation. The team becomes just one 'manager' and a scapegoat for if something goes wrong. These mismanagements are only seen from below which makes them difficult to weed out of organizations. Who cares if someone junior to them has a probabilistic chance of raising their voice? The manager is protected because the grievance is small and widespread among others. He / she can just say 'communication is important' a couple of times and then get the unruly scapegoat fired and move on to the next one.
A word to the wise: be sure that your company speaks openly and clearly about issues. Transparency (albeit under a fair system) favors the honest. It is very important to promote only the most honest behavior! My manager does and I hope yours does too!
PS: I haven't posted in about year so let me know if I let you down with this post or you don't mind seeing more like this one.
