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Forex and Philosophy
12th Jan 1999 vikram @kshitij.com
Please excuse this long mail, but I wrote something the other day, which I thought might interest you. Comments are welcome. You can also view it by clicking on http://www.kshitij.com/forex.shtml With best regards, - Vikram Murarka [email protected] Kshitij Consultancy Services http://www.kshitij.com ************ FOREX and PHILOSOPHY It may come as a surprise to those who are not Foreign Exchange (forex) traders, but Oriental philosophy is a strong force in the lives of many forex traders. Some of the best forex traders across the world have an abiding interest in the tenets of Zen, Tao and Vedic philosophies. Besides being the closest example of the elusive economic concept of 'Perfect Competition', the forex market is also a very close work-place reflection of 'life'. It has a rhythm and being of its own, which only the evolved can tune into. Like life, the market is what happens to you while you are busy making other plans. The market can defeat you, break you down. But if you learn to let go, learn to flow with it, to dance with it, it can and does bestow on you both success and fulfillment. The Philosophy of a Trader ------------------------------------ The market is always right. The market never comes to an end. The market is ever-changing, and yet, ever the same. There is no eternal damnation in the market. The only time you really fail is when you quit in disgust and admit defeat. That is like committing suicide. Those who continue to trade despite the setbacks, are the real heroes, living life the best they know how, evolving and growing through their losses and gains, through their triumphs and defeats, their fears and greeds, their hopes and anxieties. The Trader cannot afford to let yesterday's gains or losses cloud his thinking as he trades today. Though he may be carrying a position over from yesterday, he always has to look at the market afresh. Each trade, each position is a new position. Today is the first day of the rest of his life. The Market exists by itself, unaffected by and separate from the trader and his emotions. As he slowly begins to tune into the market and its ways, he starts to observe the Tao of the market. Instead of trying to force the market to do his bidding, he starts to embrace Zen and to dance like a Samurai warrior; he starts to live life instead of struggling with it. That is when he starts to make money on a sustained basis. Zen and the Market -------------------------- The concept of Zen, they say, cannot be described. If you can describe it, it isn't Zen. Zen can be felt, though. It can be conceptualised. Picture a Judo exponent or a fencer. Picture Bruce Lee. As his hands and legs move all the time - blocking, feinting, chopping, kicking, dodging - do you think he has time to think? He obviously does not. Yet, he is no shoddy amateur either. Though he does not think consciously, all his hard work, discipline and years and hours of excruciatingly painful training pour into every action that he performs. And as he pours himself into each moment, as he lives in that moment with his entire being, he is not using his petty conscious mind. The Force is acting through his body-mind equipment. The supreme Samurai makes himself available to the Force. This 'mindless' living is Zen: When you act without the dead weight of your hopes and anxieties, fears and greeds, your superiorities and your inferiorities; when you just act, when you just live. A good forex trader is like a Zen practitioner, a Samurai, a fencer, a Judo exponent. He approaches the market with the same mindset. When he plays the market, he is practicing Zen, and in turn, the market reveals to him deeper beauties of Zen. Gyan, Bhakti and Karma in the Market --------------------------------------------------- Besides Zen, the forex market also holds nuggets of Indian philosophy within the currency rates that keep changing all the time on information screens in football field-sized dealing rooms across the world. Indian philosophy concerns itself with the quest for the elusive 'Eternal Truth'. It prescribes three paths for reaching the Truth: the Gyan Marg (the path of Intellectual Reasoning), the Karma Marg (the path of Selfless Action),and the Bhakti Marg (the path of Love and Devotion). Seekers of the Truth naturally gravitate towards the path most suited to them. Quite often, there erupts, among the Seekers, an argument as to which is the better path of the three. The experiences of countless Seekers reveals that the Bhakti Marg or path of Love and Devotion is both easier to walk on and reaches the Truth faster than the path of Intellectual Reasoning or Gyan Marg. In Gyan Marg, the accent is on the use of your intellect to realise a Truth which is larger than yourself, larger than your intellect. The Seeker seeks answers to questions such as, "Who am I? What is eternity? What was there before eternity and what comes after it? Where did I come from, and what is the cause of my being?" He tries to use his limited knowledge to reach pure knowledge. The movement is from the limited to the limitless. Acceptance and faith, on the other hand, are two of the key characteristics of the Bhakti Marg. The bhakta, from the very outset, accepts that there is a Truth which is pure and eternal, and much bigger than his own intellect can grasp. He loves this Truth- force and devotes himself to it. He sees himself, not as separate from the Truth, but as a part of it. He attempts to reduce the encroaching effects of his small emotions and thoughts on the functioning of the Truth through him, by trying to replace his petty emotions and thoughts with love and devotion for the Truth. Similarly, the correct forecast as to the direction a currency is headed, is the Truth which all traders in the forex market seek, using techniques like Technical Analysis and Fundamental Analysis. Much like the Seekers, there also exists, a never-ending, traditional controversy or rivalry between Technical Analysts and Fundamental Analysts. The Fundamental Analyst makes his forecast after reading all the bits and pieces of economic and political news available to him. He analyses streams of economic statistics such as trade figures, investment flows, industrial growth, inflation rates, etc., and uses all this data in conjunction with his economic theories to piece together a forecast. The focus here is not on the market per se, but on deriving the market as a result of number-crunching and economic analysis. This method can be likened to the Gyan Marg as it deals with cause and effect. Its success depends on the analyst putting forth the correct reason for the market being where it is. The pitfall is that it is possible to put forth a number of plausible reasons for the market being where it is. The Technical Analyst on the other hand, uses charts and graphs to make forecasts. These charts and graphs depict the state of the market at that moment, while also graphically showing the path the market has taken to reach its present state, and the rate being traded in the market at that moment. These charts, with uncanny regularity, trace out familiar pictorial patterns such as Head-and- Shoulders, Double-Bottoms and Triangles. These patterns have been seen to hold true across all traded markets, be they markets for currencies, stocks, bonds, pork bellies, gold or oil. The Technical Analyst does not try to rationalise WHY the market is where it is. He does not need to read any news or look at economic data. He studies the charts, recalls old patterns, and tries to visualise where the market is now headed. This is an intuitive approach, an essentially aesthetic and pictorial approach, which does not concern itself with reasons, but tries to reach the truth almost directly. This method can be likened to the Bhakti Marg. Ultimately, however, the Truth has to be lived. The Truth as you understand it. The trader has to trade in sync with whichever forecast he believes in, irrespective of the method (Fundamental or Technical) by which it has been derived. This is the path of action or Karma Marg. The trader goes into the market with the foreknowledge that his conception of the Truth, his forecast, may be wrong. He knows that the market will test his forecast. If his conception of the Truth is correct, and if he has traded in line with the conception, he will make money, or else he stands to lose money. This foreknowledge prompts him to place a Stop Loss on his trades - he gets out of the trade when he realises he has done something wrong. He bears the loss that has occurred, but lives to trade another day. Much like the everyday heroes of real life, living the best they know how, in line with their conception of Truth, but ready to stop, learn, change and grow.
