Today, the markets were crashing, and surprisingly, in one Volleyball WhatsApp group, some discussion about markets and trading started. After some exchange of opinions and outlooks, one friend posted a good analogy and referred to stock trading as like driving. ("Trust in your driving skill and Luck than worrying about DUI..by others. Know that it exists.") Well said. Stock trading and driving- I have done enough of both the last few years- to the extremes of loving them, and hating them too. Thanks to COVID, I am spending that time of 405 on Mt McCoy and biking on Simi's streets the last two years. Still, sometimes, I miss the road Anyway, enjoy some parallels as I relate them to each other.
I do think stock trading is very much like driving on a road or a freeway. When you are in traffic, you generally feel that you are in the wrong lane (investments)- you have made a wrong choice. Still, you may decide to hold on a bit longer, just to find that your chosen stock is still not moving as quickly as others are moving. You see or feel that cars in the other lane are going faster so finally you give up and you change lanes (investments) only to find that the lane (investments) you exited has now started going faster :( This is more common than an exception.
Unlike cars in driving, stock trading allows one to quickly change investments, or add new investments. It is all digital. You just need to push some buttons. Some car zooms past you on the freeway, and you feel that it is really a car you must be in! You press some buttons and you are in! Once you are in, miraculously somehow it slows down or stops ! This happens to most of us if not all with the stocks we pick to invest in. This happens once or twice and you start doubting and neglecting opportunities to jump into fast-moving stocks. However, now it is different. When you choose not to invest in them, they keep going up and up! Then regrets come first for missing out on the opportunity that you seriously believed in. You again get convinced that you really do have eyes for good cars (stocks). Then you again start jumping lanes, switching cars, and maybe it is your weight or your bad luck, the story repeats. You generally end up thinking why does this happen only to you. If you buy, it doesn't move. if you don't, it keeps going up! When you should be changing lanes, you don't, and when you shouldn't be, you do. This is not because you are stupid. It is because of how mysterious and enormous the systems (markets) are for one brain to decode. Now we are frustrated enough to quit trading. However, some invisible hand starts favoring you (like a stranger giving you some free alcohol or smoke when you are thinking to quit), and your choices to change lanes, or stay put appear to be turning correct! Voila! You are back in the game, back on the roller coaster ;).
Markets are more like congested freeways. Highly competitive. You try changing lanes hoping to beat the traffic (other drivers) but then you realize that it is difficult to beat the markets. It is not worth the hassle. Other times, driving becomes dull and tiring, and you decide to stop driving yourself. You decide to get on the bus and have someone (a portfolio manager) do the driving for you. You pay his fees (fare). Most of the buses seem to be going slower than most cars on the freeway. However, unlike most car drivers, bus drivers are for the long haul. Professional drivers generally beat regular drivers. I drove on the 405 freeway for a few years. If you are in LA, you probably know Life on 405. (Click here to see to some photos I took on the 405 freeway) For me, the benchmark for success was to beat the LAX shuttle bus that runs between LAX and Van Nuys airport. The drivers of these buses, like seasoned portfolio managers, do know the 405 better than most ordinary drivers. This is how those who are not meant for the rigors of trading become passive investors.
In driving, often comes a time when you feel like you are flying. You are going full cylinders. (All those passive passengers in the bus look at you with hidden but obvious jealousy!) You don't see anything that can go wrong. You start driving from 65-70 mph to 100-110 mph, even around 140-150 miles per hour. You miss to acknowledge the risks, and from nowhere comes the Subprime crisis, dot-com burst, or Covid outbreak, and you find it impossible to press the brake in time. You are suddenly in some fog, your vision is blurred and before you realize it, you end up losing all that took you a few months, a few years to build.
Even if you are prepared and destined for success, there are other risks you need to be aware of. DUIs, cops, potholes, some debris.sudden break down of your car or the car in front. Fed meetings, elections, earnings, political and natural disasters, scandals, downgrades, employment numbers, inflations, bullish calls and bearish comments on CNBC, and whatnot. You can't control any of this shit! There is really so much that is acting against you! Still, like a hero, you are on the 405 every morning and every evening.
And yes, last but not least. Those backseat drivers. You are the one who is driving but many times, your spouse or a friend gives you tips and ideas about how to drive. You are 20 years veteran on the freeway. They really don't drive but they seem to think that they are a better driver than you. They really don't play the market but they believe they know more than you. They are as annoying as the markets at times ;) However, as a driver, the roads have taught us to be patient, to be tolerant, be respectful to the rules, to the signs, to fellow traders, and to back-seat drivers. Whatever the cause is for a loss in the trade, it is because of the choice we made. We put our lives in the middle of 80 mph speed, and our little money in front of millions of vultures and Wall Street wolves every day. Sometimes we win, and sometimes we lose. We take responsibility and do not pass the blame on to someone else. This is what the market has taught me, and the roads have strengthened.
Good night. Oh, if you survived this post up to this line, I am sure you would like this post about 405 on my Facebook page!
