When I began reading Homo Deus: A Brief History of Tomorrow by Yuval Noah Harari, my intention was to focus on anything but trading. However, as you might suspect since this is included in my book list, quite the opposite happened.
Harari, the best-selling author of Sapiens, which zeroed in on how the power of human imagination has fueled our evolution, has in Homo Deus turned his gaze to the future of humanity to ask the following: What is the next stage of evolution for humans? Are we trying to turn ourselves into gods? And, if so, is that quest really beneficial to humankind?
Our brains are made up of a balance between emotional and cognitive inputs. As traders, emotional influences very often override or overpower our cognitive thoughts. I simply accepted this as reality, assuming that this would always be the case. However, Harari provided a real-life example that totally captured my attention: An experiment he observed at an army scientific facility.
It was a project aimed at improving a sniper’s accuracy. In the first part of this test, a sniper would go into a small enclosure and was tasked with picking off a charging enemy equipped with rifles and explosives. When the time was up, the door would open and the sniper would emerge to view the outcome. The result: The enemy had not been destroyed and the sniper was left shaken and disappointed with her performance.
Later, the same sniper, was led back into the enclosure. However, this time she wore an electronic transcranial helmet that blocked emotional responses. Once again, the enemy attacked. A few minutes later the door was opened when the exercise was over and the sniper was given her results: She hit all her intended targets!
The blocking of emotions allowed the sniper to do exactly what she was trained to do. Of course, I immediately found myself thinking of this application in the trading community and the notion of being able to effortlessly get out of one’s own head to focus solely on the task at hand. Let’s face it: A lot of traders would probably jump at the chance to purchase a “transcranial trading cap” in the quest toward profitability.
While it would certainly yield much better trading results if we could literally cut out outside noise, the fact remains that we are not androids devoid of emotion. Would we truly want that? You might be emphatically shaking your head yes, eager to turn yourself into a trading deity. But it’s a question truly worth pondering.
While knee-jerk responses are definitely detrimental to our trading, learning to read our emotions and navigate them successfully is not only beneficial to our trading, but also to how we live our lives.
The market is not powered by bots. It’s powered by other humans. Humans with emotions. Thus, market reactions are human reactions. And understanding how to stay calm and accurately read those emotions as well as your own, can be trading gold. It has always been a guiding principle in my teachings and is one of the main tenants of our intensive courses at Jim Dalton Trading.
If you haven’t already, I urge you to read the thought-provoking Homo Deus for yourself and explore the questions that Harari asks. Whether you love it or hate, you will think about humanity with different eyes! I look forward to hearing your thoughts.