The @@@###!!! Asian trade

Three men doing time in a Israeli prison are up for parole.

Case 1 (heard at 8:50 a.m.): An Arab Israeli serving a 30-month sentence for fraud.
Case 2 (heard at 3:10 p.m.): A Jewish Israeli serving a 16-month sentence for assault.
Case 3 (heard at 4:25 p.m.): An Arab Israeli serving a 30-month sentence for fraud.

Which one gets to go home? It’s not the one you think. The Jewish inmate gets to stay in prison while the Arab Israeli that has his hearing early in the day gets his freedom back. In a fascinating study, highlighted in this week’s New York Times, the deciding factor was not ethnic background but time of day. He writes “There was nothing malicious or even unusual about the judges’ behavior, which was reported earlier this year by Jonathan Levav of Stanford and Shai Danziger of Ben-Gurion University. The judges’ erratic judgment was due to the occupational hazard of being, as George W. Bush once put it, “the decider.” The mental work of ruling on case after case, whatever the individual merits, wore them down. This sort of decision fatigue can make quarterbacks prone to dubious choices late in the game and C.F.O.’s prone to disastrous dalliances late in the evening.”

In fact the statistics are astounding. Prisoners who appeared early in the morning received parole about 70 percent of the time, while those who appeared late in the day were paroled less than 10 percent of the time. Those are incredible odds and ones that any trader would take in a heartbeat in the morning and avoid at any cost in the late afternoon.

Decision fatigue is phenomenon that we are only starting to understand, but for us as FX traders it is a constant danger that we face every day especially recently. If you are are at all like me, daytrading the FX market, you may have made as many as 20 trades per day during the unbelievably volatile markets that faced us this month. By the end of the day I was clearly exhausted, yet I pushed myself further doing what I later came to be known as the @####$$!!! Asian trade. I would lay down one last trade of the day on the Asian open just before catching 3 hours of sleep, only to discover a stop out every time I woke up.

This process continued for about 4 straight days before I finally realized that I was the victim of decision fatigue -- the more I trades I executed, the more decisions I made, the more likely I would lose money.

When we are in the middle of flow the forces of greed (just one more winner!) and fear (I gotta recover that last loser!) constantly tug at us forcing us to make more and more decisions which have a decidedly diminishing return on our trading account. Something to remember, the next time we face the @@@###!!! Asian trade.

Boris Schlossberg

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