So Much Pressure

The first post in my new blog.  The first post in my first blog.  God.

For the last year or so, I have been writing up my investment activities in Notes and posting them on Facebook for my friends and family to read and comment on.  I did this hoping to spark a few lively discussions and free exchanges of ideas, to keep myself honest, and to share some of the knowledge I have gained while working in the futures trading industry for 13 years.  Two out of three isn't bad.

I got some good questions asking about this or that, but very little in the way of idea exchange.  The big success story was in how I approached my trades after committing to explaining them to others first.  OK, "first" didn't always happen, so there was often a fair amount of post-trade rationalizing going on; but there were several times throughout the year when I decided to make a [poor] trade but then abandoned it because I couldn't think of a clear way to explain how it might be successful.  Every saved loss is a win.

Ultimately, though, I found the Facebook Note mechanism unsatisfying.  I started following Mark Wolfinger's excellent blog Options for Rookies, had some very interesting discussions with co-workers about option-spread trading, and began playing around with Think or Swim's trading front-end using a paperMoney account to try out ideas without throwing real money away to do it.  As I spent more and more energy learning about credit spreads and option position management, I started contemplating discussing these topics on Facebook, to my friends and family.  I was certain I would immediately confuse them, and I might as well just write my thoughts in a trading journal and keep it on a shelf.

Although trading journals are very valuable, they don't come up with ideas on their own.  I realize that for the indefinite future I can expect exactly two regular readers of this blog - my wife and my mother - but nevertheless the possibility exists that someone will stumble upon this public journal, read it, learn from it, and respond with ideas of their own.  That would be cool.

I also want the freedom to talk about stuff other than trading.  Under my Notes pattern, I felt like I had specified my topics in advance and changing them would make things too incongruous.  Beyond investing and trading, I hope a regular reader will find interesting commentary from me on poker, software development, life in Chicago, skiing, and many other things that pop into my head.  If not, then at least I'll have recorded my thoughts somewhere and stressed out about my grammar from time to time.  That's important, too.

I chose the name Risk of Ruin because I am a big fan of the concept.  I think it appears everywhere in life: it's why you buy insurance, wear your seatbelt, favor crash-tested cars, and avoid restaurants where your friend got food poisoning once.  It is the single biggest force in a poker tournament, one that must be simultaneously defended against and wielded in order to succeed over the long term; it is the primary deciding factor on how "big" a game to play; it is the bogeyman that good bankroll management practices are designed to avoid.  It controls all trade-sizing decisions more than anything else; it is the entire reason why you should diversify your investments.  It explains why people who have never skied before think we're all crazy; experiencing its touch is also why we love skiing so much.

Risk of ruin, to me, is more than its definition with respect to trading or poker.  It is the flat line on the bottom-right of every net worth graph and EKG display.  It is the poison that must be drunk in order to participate in life's game.  It is the femme fatale flirting with you in front of your wife.  It is the Queen of Spades in a game of Hearts, helping you win or making you lose depending on your skill and a whole lot of chance.  It's Gravity.

OK one more cheesy example because I love it so much.  This will also establish some geek cred.

In the Star Trek TNG episode "Tapestry" (wiki), Captain Picard dies because a minor phaser blast damages his artificial heart.  Q catches him in the afterlife and sends him back in time to avoid the bar brawl in his youth that ended with him getting stabbed in his natural heart and needing the replacement.  Doing so, Q argues, will ensure that Picard survives this present-day minor skirmish.  So Picard goes back and avoids taking the risk of the bar fight.  It turns out that this scene was an inflection point in young Picard's life: after avoiding that risk of death (aka ruin), he finds himself always taking the risk-averse paths, unable to accept that an uncommon life requires uncommon risks.  Popping back to present day, we discover aging Lieutenant Picard is a pathetic little man with little dreams.  After several depressing scenes of mediocrity, the hero within demands a repeat audience with Q.  Eventually, Picard chooses certain death after a hero's life instead of an extended but unsatisfying existence.

In the real world, we don't get to go back in time and approach our actions with the certainty of known outcomes.  This makes it a lot more exciting, don't you think?