Monday, May 18, 2009

Emotional Risk Management: Reflections of a Wanna-be Surfer

By Dr. Ken Celiano with Mark Paulik

Date: Summer 1982
Place: The Jersey Shore, Manasquan Beach
Scene: At sundown with a hint of moonlight, 7-foot and higher waves roll one after the other; skilled surfers on quick, short boards knife through waves. A 21-year-old rushes to the beach after a long day caddying, eager to score some waves before darkness takes over.
Enter: I paddle into the surf on my long board, climb over white water that knocks me side to side as I head toward a big wave, excited to show I have the right stuff among a throng of local professionals and aspiring amateurs. Onlookers hang on the beach and soak in the scene, drinking a few beers. I catch a perfectly shaped wave. Thrust to the top and staring over the edge, I quickly descend its face, fall and roll out of control into the sea ?oor. “Wow, that was awesome power,” I think. But it hurt, too. Thoughts cascade through my mind as I paddle out to catch another set. This time, my excitement is tinged with fear and doubt, wondering, “Do I know what I’m doing? Can I surf these kind of waves?”
Boards are breaking in half; skilled surfers abandon the water; waves surge relentlessly toward the beach. It’s getting darker. I am alone, stuck and realize I can’t get back in. I scream for help. No one hears. My only thought: “I have to get out of this place!”
Endurance: I take the plunge on a 7-footer, kick my board from underneath, accepting that I am not skilled enough to ride this long, thin-nosed board in these kind of waves. The rip cord on my ankle keeps me tethered to a sling-shot that will soon challenge my endurance and breath. A wave catapults me off the board. I sink to the ocean ?oor. The wave throws my board toward the beach, pulling me under. Then, my head breaks the surface, and I gasp some air, only to see a missile throttling toward me. I duck, avoiding the nose of the board as another wave crashes on me. Holding my breath, I ?nagle the cord from my ankle, knowing my safety lies in body sur?ng a massive wave to the beach.
Exit: I kiss the sand. I take a breath, grateful to be alive. My board washes up beside me. Departing the beach, I am a wiser wanna-be ­surfer who respects the power of the ocean.
Surfing Markets
You are probably wondering what this scene has to do with wanna­be traders looking for pro?table waves. To keep it simple, it is all about the wave and having the right tools and skills to ride with courage and competence.
As you have likely concluded, I had no business being in the ocean that day. In addition, I had the wrong board and my skill was better suited for 2- to 3-footers. In short, I was not a skilled surfer. My excitement deluded me until the crashing wave woke me to a harsh reality.
Market prices rising and falling can be thought of as a consolidated wave of human decision making fueled by emotional intensity. I never thought that my days sur?ng would in?uence how I coach traders to ride emotional waves. But, as we appreciate more than ever, if you are out in the markets today, the skill to surf this kind of volatility requires intense emotional management. Without it, you are like I was, gambling on a thin-nosed long board wishing on a star to make it home alive.  

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