The Thrill of the Trade

Fortunes have been made. People have killed themselves. Reputations have arisen. Reputations have been crushed. Sounds like poker, right? Well, in many ways, it is. But the layman don't generally think of trading as a game. In today's financial markets, many assets can be traded, the most well-known of which are stocks. Did you also know it was possible to trade the weather? Kilowatts? Oil? Enron collapsed because of it. But enough romanticizing for now; this post will detail some of the ways how game mechanics can be found in trading.

1. The Magic Circle

While anyone can trade from their home computer, there are entire spaces dedicated to the craft. For example, in the trading space above, one row might be dedicated to trading commodities (corn, wheat, cows, orange juice) while another row is dedicated to trading stocks (MSFT, GOOG, XOM), and another dedicated to trading complex derivatives (mortgages, repurchase agreements, collateralized debt). The atmosphere and energy in such a "magic circle" is completely different from anything you'd find anywhere else. It's incredibly intense and rising tempers are not uncommon.

2. Language and Rules

If someone started talking about candlesticks, spreads, and contango, you'd probably think he was insane. There's no way a candlestick, strawberry jam, and some obscure dance form could possibly be mentioned in the same context. But in trading, these actually refer to a type of chart, a price differential, and a pricing condition respectively. Everyone in the know knows exactly what the trader is talking about when he mentions these terms. The better you know the rules, the more likely you are to minimize your risk and maximize your gains. Although, even some of the best traders have gone down in flames.

3. Players

There's got to be someone sitting behind that desk, after all. But instead of using a game controller, he might, for instance, be using a Bloomberg Terminal, which requires learning how to use. There are also different kinds of players. The stay-at-home trader, the swing trader, the corporate trader, and the buy-and-hold trader are several types of player types found in trading. Warren Buffet, for example, is a famous buy-and-hold while the people who had worked at Enron were swing traders, manipulating energy prices and readjusting trading positions dozens of times a day. Traders can also belong to different institutions, which can be thought of as guilds in a way. Goldman Sachs, Exxon Mobil, and Berkshire Hathaway all each have their own culture and trading practices. The first is an investment bank, the second an oil company, and the third a hedge fund.

As you can see, gaming frameworks are widely applicable to trading. In fact, many traders actually think of their job as a game. It's fun, it can be rewarding, it can be frustrating. Real-time money is at stake. Most never become superstars. However, they still enjoy observing the techniques of the titans.