The Commonalities of Trading and Dieting

Photo by Towfiqu barbhuiya on Unsplash

I’ve been thinking a lot lately about how much trading and dieting have in common to the point that I decided to write this post to compare and contrast. This may sound a bit absurd at first, but humor me.

Let’s start with a simple truth, successful trading and successful dieting require some kind of plan and there isn’t just one plan that works, lots of plans work.

For example, viable diet plans include Slow-Carb, Keto, Paleo, Atkins, South Beach, and so on. If followed, each of these plans can yield considerable results.

Similarly, there are all kinds of viable trading plans. Examples might include macro trading, relative value trading, systematic quant trading, spread trading, etc. As with diet plans, I’ve met people who have achieved success with each of these methods (and a lot more methods).

With both trading and dieting, it is not too difficult to come up with a sound plan that will work if you follow it. What’s more, none of these plans is all that difficult to understand if you do a little research. But this, dear readers, is where the plot thickens.

In both trading and dieting there is a huge disconnect between knowing what to do and actually doing it.

Viable diet plans are pretty easy to follow, in theory - eat this and don’t eat that. Yet, despite this, so many people cannot follow these plans. When it comes time to do what needs to be done, for one reason or another, they just can’t or won’t follow the plan. Usually dieting failures relate to prioritizing food enjoyment, social burden, or focusing on short-term gratification at the expense of long-term weight goals.

Trading is incredibly similar. Traders put together all kinds of reasonable, if not great, plans on how to trade the markets. Yet, when rubber meets the road, they cannot follow these plans. Failures to follow trading plans typically come from fear and greed. Let’s move on to my next point.

Another thing that trading and dieting have in common relates to the reality that sellers of plans put undo emphasis on things that really don’t drive results.

What do I mean? I will start by talking about dieting.

The bottom line with weight loss is you have to burn more calories than you consume for long enough to achieve weight loss. Whether you’re eating zero carbs or two burgers a day doesn’t really matter as long as your caloric intake comes in below your caloric expenditure. Don’t believe me? Check out this article on a professor from Kansas who lost a bunch of weight eating junk food. When you strip away all of the frills and thrills with dieting, what is left is simply calories in and calories out.

How does this relate to trading?

So many in the trading guru camp focus on entry logic or the analysis method to identify a trade when, per my research, there are three things that really matter:

1. Respect the trend

2. Stick with winning positions

3. Get out of losing positions

To be clear, I’m not just talking about buying breakouts in stocks or commodities - many great traders ride the trend in their equity curve on mean revision strategies.

My take, based on considerable study, is that success in markets really boils down to these three factors. You might argue this is more complex than simple calories in and out, but is it really that much more complex?

While I’m on a roll, I’d like to share one more thing on dieting and fitness.

I cannot get through a week where I don’t see some kind of article which shows the enviable torso of such and such actor who got in the “best shape in his life” for his latest movie. Often, these articles talk about how this actor spent months training with Navy SEALs and how their workouts turned said actor into the lean mean fighting machine that he is today. The articles will talk about how many pushups or pullups the actor did but they rarely talk about diet.

So what?

I actually have personal experience working out with Navy SEALs. In fact, I spent the better part of a year working out almost daily with a Navy SEAL when we worked together in the early 2010s. Said Navy SEAL had solid workout routines (CrossFit) and he was indeed in great shape, but he and I would frequently discuss all things fitness including the reality that, if your diet isn’t right, you might achieve a magazine cover level physique, but it is going to live underneath an inch or three of fat so no one will know. Ultimately, my SEAL pal believed that perhaps 15% of getting in magazine cover shape came from exercise while the other 85% came from eating right.

Conclusions?

Knowing what to do is not the same as doing it.

The real underlying drivers of results are often incredibly simple but concise truths don’t make for good marketing.

Success tends to come to those who identify what matters and follow a plan.

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In other news, I’m having a Memorial Day sale on my secular trend stock market research. $99 for the first year or $10/month: https://mktstrat.substack.com/memday