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The Four Cardinal Virtues of Trading, pt 1 of 5
Introduction
Note: This paper is a response to what I call "the Zen phenomenon." Whether the subject is personal relationships, house decorating, motorcycle maintenance, or trading, someone has applied the art of Zen to it. A Zen approach to trading is problematic (for me) on two counts. First, commodities trading is an inherently materialistic endeavor while Buddhism seeks to escape the material world. Second, I'm not a Buddhist; I'm a Christian, so a Zen approach was at odds with my world view. This led me to consider trading from the standpoint of classic Christian ethics.
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Success requires that you know yourself and that you know your opponent. This is particularly true in the futures markets. The basic strategies for trading, the "rules of the game" if you will, are very simple, and yet a very high percentage of the people that try their hand at trading fail. The key to success and failure in the markets has little to do with the rules of the game (although they can't be ignored); it rather has to do with knowledge of self and of the opponent. To put it in ethical terms, it is the difference between following the rules and doing the right thing.
Ethics is a study of doing the right thing. A classic Christian approach to ethics is to consider human action through the lens of the seven virtues and the seven vices. A study of the vices will give insight into the results of doing the wrong thing. That is not our primary interest; it is rather learning how to do the right thing. This essay will therefore consider the virtues.
The seven virtues are subdivided into two groups. The three theological virtues (faith, hope, and charity) are a divine gift. They are unique to Christian faith. The four cardinal virtues of prudence, temperance, justice, and fortitude are the human response to the divine gift. They are, in a sense, how we work out our salvation (Phil. 2:12). Just as the three theological virtues are uniquely Christian, the four cardinal virtues are "natural." They apply much more broadly than just to Christian faith. While the three theological virtues lead to successful faith, the four cardinal virtues lead to a successful life. This essay will consider these four cardinal virtues as a path that leads to successful trading.
Common definitions for these four virtues are as follows:
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Prudence: this is the virtue of common sense.
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Temperance: this is moderation in the use of the world's goods.
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Justice: this refers to fairness, give and take, and honesty.
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Fortitude: This is the will to persist in the right despite unpleasantness.
In the vernacular we might say the four cardinal virtues are (1) common sense, (2) moderation, (3) being a good sport, and (4) guts.
Over the next several pages, we will consider each virtue individually.
Next: Prudence, or the virtue of common sense
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