Karma and Trading

Trader's Mindset

May 06

Karma may sound like a mysterious, mythical, or religious concept to many of us who aren’t religious. However, Indian mystic Sadhguru has explained Karma as simply memory and the influence it has. It is in that narrow respect that I feel “Karma” has a critical importance for ones trading and life. In this narrow respect, Karma requires no religious belief.

If we think about something like our body type whether we are happy with our body or unhappy, what we ate today or even yesterday has minimal effect on our weight. In effect, our body weight is determined by the body’s ability to “remember” what we ate over time and going back into the distant past. If someone feels upset about their weight, feeling like they aren’t to blame or responsible: there really is some truth to that. Because responsibility implies that we could change it. Yet, we can only change our weight gradually. A very heavy person has to eat less and do more to lose weight then the average lighter person has to do. One’s body weight on any given day need have no correlation with what they ate or did that day.. Yet, over time eating healthier and doing more activity can have significant impact. This brings up a good point: we cannot change the past, we can only influence the future.

Every belief we have about trading has an original source. The belief may have originated from a book or blog we read or an original observation: but we are products of memory. If we make the same mistakes over and over in trading, it can only be explained as the prior memory exerting an influence.

If we think about a trading system or program, a trading system is purely a function of its programming. It is purely a function of memory. Whether the system does good or bad, it can never be more then its programming.

People are largely a function of their programming too. However, we have the ability with great effort to apply our conscious volition and through that we can nudge, ever so slightly the programming. As traders, we must therefore strive to be more conscious, to be more aware. One way to do that is embrace a state of unknowing.

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at curtis@beyondbacktesting.com.