Why I Trade

by Peter Harrington

Posted on Oct. 24, 2017, 11:40 a.m.

Why do we trade? Why do spend thousands of hours looking at code and black and white papers with complicated math symbols? I've heard other quants talk about how beating the market is one of the hardest challenges, involving skills learned from the fields of computer science, finance, statistics, and psychology. It is a big challenge and doing hard things can be a reward in its self.

It is also fun to prove people wrong. A doctor last year told me I couldn't beat the market, then he misdiagnosed me. Luckily I didn't believe him on either account.

Trading securities on the open market as a business has a certain purity to it that you cannot get from other businesses. I compare it to an individual sport like running or swimming: it is just you and the clock. Sure there are other competitors, and environmental factors such as the weather for running. These factors play a minor role in your performance compared to other sports, team sports. Compare a business trading securities vs. a business selling a good/service. The latter has to choose the right market, they have to choose the good/service, then they need to execute and deliver the good/service. It is a lot less pure than a business trading, it is not just you and the market.

Solving hard problems, can be fun but once you solve them they get old. I played video games as a teenager, one day while visiting my parents' house with my family my son wanted to see those video games. It was fun teaching him to play, and quite rewarding to see how quickly he picked it up. The next morning the video game console was out, and I remembered how rewarding it was to beat a game. I thought: I will see if I can beat this game again, however as I started to play it became boring and monotonous to go through the game, and I saw myself wasting a few hours of my precious early morning time and put the game down.

All of the three reasons I listed are good but, I believe after a while they get old. Recently there were a number of hurricanes hitting the southern part of North America and destroying homes. My cousin has a tug boat in the Florida keys, he got his boat to safety but when the storm was over there were many people, perhaps in the hundreds who did not. Their boats were blown into marshes or on the beach and they needed help getting out. My cousin had pulled out over 20 people for free when I heard what he was doing. He had run into one snag: boats with a lot of torque require a lot of gasoline which costs money. I didn't hesitate to contact him and see if I could help out, I had a good year trading.

It felt good to be a position to direct capital to a cause which I felt was worthy, but ultimately what felt good was helping other people out. I believe this is a lasting reason to trade.

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Hi this is Peter Harrington's spot for discussing all things related to quantitative finance. Mostly focusing on how to build your own system and strategy. I focus on Long/Short equity and futures, but am open to learning about other assets and strategies.