Sleep On It

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Inspired by this Tweet by someone named Juthica, I wanted to make some comments on the nature of 24/7 trading during volatile environments. One can reasonably ask, if you were to design a modern 21st century financial market, what would it look like?

The answer was simple to me in my early 20s. It should be live at all times throughout all holidays (after all, not everyone on planet earth shares the same holidays). Liquidity and transaction completion should be available on demand at the stroke of a key on your laptop at 5am, if needed. Sunday, Christmas, Ramadan, it shouldn’t matter. If you want to trade you can trade.

As a former algorithmic trader at a bank, the calculus is simple. The more hours we can trade, the more money we can make. There are 24 hours in a day, and 7 days in a week. Let’s just do it all the time. After all, bonuses don’t hand themselves out, right? Simple.

Not so simple. Quick, obligatory Wall Street story. When I was a young trader, my NYC trading desk did a particular strategy in Asia. This required a rotation of traders in the New York office to do Japan hours, approximately once every 6 weeks.

You get in on Sunday at 5pm, stay until the trade execution happens overnight (morning in Tokyo), and leave around 4am Monday morning EST after confirming the portfolio looks good.

Also, you were expected to go home, take a shower, get 3 hours of sleep, and still make it back for the 9:30am New York open. It was both grueling and thrilling as a young trader, to have a black car take you to the office and back to execute trades on the other side of the world. To riff on the drinking joke, it’s always 9:30am somewhere in the world, right?

But in intensely volatile situations, I am no longer sure 24/7 trading is a good idea for any asset class, whether Tokyo stocks or Crypto. Constant volatility creates constant anxiety, and especially with the ubiquitous access to information the movements of markets will always impact you. People need to breathe, and it’s impossible if oxygen is being pumped constantly without respite.

In short, it’s not good for people.

And as Juthica mentions, sometimes when dislocations and volatility are so enormous, deals need to be cut for financing. This happened a lot in 2008. They flew a private jet with a physical check from Tokyo to NYC over the weekend to make sure Morgan Stanley didn’t go bankrupt Monday morning.

So having an enforced time out period, to “cut deals” to shore up your finances, to talk to your wife and recognize what is actually important to you, to assess if you are trading on tilt, etc. can be frustrating for traders yet entirely necessary.

Casinos do this as well! And gambling and markets often resemble each other more than we think, as one of my favorite authors Aaron Brown has written about. When things get crazy at high limits, despite it being in their interests for you to keep bleeding money, casinos will cut you off. Take a break, reassess.

So I’m willing to admit that in the arrogance of my youth I was wrong — it might be a good thing to enforce a worldwide halt, even for a few hours, of the trading of any asset. Give humanity some time to sleep on the events of the day.

We can always trade tomorrow.