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Procrastination and Market Cycles

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I love putting things off. It's in my blood-- ever since I ignored my moon phases project in the 2nd grade, which led me to drawing a bunch of oddly shaped circles on construction paper the night before the project was due.

It's Not What You Think

Enter this New Yorker Post, titled Later: What we can learn from procrastination. The article isn't the kind of self-help porn that we often see when we discuss this topic. It is instead a book review about the study of procrastination. One thing stuck out to me:

[...] procrastination starts to look less like a question of mere ignorance than like a complex mixture of weakness, ambition, and inner conflict.

So rather than looking for new software or other hacks that will make us more productive, there may be an underlying set of emotions that go on when putting off large tasks.

Procrastinating Trading

One way a trader can lose money is ignoring the best setups-- essentially procrastinating. Once the best setups are ignored, and they work, the trader will move on to lower odds setups out of fear of missing the big move, or out of spite due to lost potential profits. I've seen this in my trading, as well as others who have come and asked me for help with their performance.

I think that there is certainly a procrastinating element. Traders certainly have a mix of weakness, ambition, and conflict. There is always the conflict of the need to be right over the need to make money. It seems that the stars have to align for us to put risk on the table, and when we do, we actually have a higher risk because we put off our setups.

What the Market is Putting Off

This current market felt like it was procrastinating. It never really pulled back and stayed in overbought conditions, and it never ripped higher. As the market often acts as a collective consciousness, it seems as though she was putting off movement. And that makes sense-- there was plenty of uncertainty due to domestic elections and QEII. So once the stars aligned, the market stopped putting it off, and we saw a great run over the past 2 days.

Problem is, if a trader has procrastinated and waited for the "perfect setup," the risk is actually higher at these levels relative to the slow, uncertain crawl that we had over the past few months.

by Steven Place

Steven Place is the founder and head trader at investingwithoptions.com/