The Wall Street Journal ran a tabloid-like article about Monroe Trout. The article spoke of a lawsuit between Trout and his brother. Why mention this article? The piece that ran in the Journal also poked fun at Trout for following the philosophical tenets of Ayn Rand. This seems like an odd thing to make fun of given that Ayn Rand is also Alan Greenspan’s favorite author.
Rand’s teachings and writings rooted in laissez-faire capitalism are the ground upon which successful traders must stand:
Man’s mind, states John Galt, the protagonist of Atlas Shrugged, is his basic tool of survival. Life is given to him, survival is not. His body is given to him, its sustenance is not. His mind is given to him, its content is not. To remain alive, he must act, and before he can act he must know the nature and purpose of his action. He cannot obtain his food without a knowledge of food and of the way to obtain it. He cannot dig a ditch or build a cyclotron without a knowledge of his aim and of the means to achieve it. To remain alive, he must think. Thinking is not an automatic process. A man can choose to think or to let his mind stagnate, or he can choose actively to turn against his intelligence, to evade his knowledge, to subvert his reason. If he refuses to think, he courts disaster: he cannot with impunity reject his means of perceiving reality.
Ponder her writing in the context of trading. Would not the quick fix of blindly following your broker’s opinions, chatting at Motley Fool, griping at RagingBull.com, trading RSI or watching support/resistance levels — don’t these actions all involve choosing not to think? Would you not be allowing your mind to stagnate by evading the pure reality that these actions distort? To follow these hollow messages over the year indeed courts disaster. We are sure all readers know at least one person that went belly up by refusing to think.
Trading is a game where it’s you against the world. It’s not you and your friend or you and your broker fighting together. It’s you. You are left to objectively use your mind to determine the best course of action in order pull a profit from the great ocean of other traders in the world that also play the game. You must dig deep to understand why one course of action is better than another and avoid decision making based on fear. Pure fear is why the Nasdaq rose so far and plunged so low. And those that controlled their fear made a killing.
The phrase “choosing not to think” is the precise diagnosis of every trading failure Rand would identify. The broker’s tip is not thinking. The message board consensus is not thinking. The RSI crossover signal without understanding why it produces edge is not thinking. All of these substitute someone else’s process, or no process at all, for the trader’s own rational assessment of what the market is doing and what the rules for responding to it should be. Galt’s argument is that survival requires active thought, and that the refusal to think courts disaster with the same certainty that refusing to eat courts starvation. The trading parallel is exact. The trader who refuses to think through their approach, who takes someone else’s word for what to do and why, is courting financial disaster as surely as the man who refuses to think about where his food comes from.
The Nasdaq rise and plunge is Rand’s argument at market scale. Pure fear drove the rise as investors feared missing what everyone else was gaining. Pure fear drove the collapse as the same investors feared losing what they had gained. Both moves were driven by emotion overriding rational assessment. The traders who controlled their fear, who had a system, rules, and the discipline to follow them regardless of what the crowd was doing, made a killing in both directions.
Atlas Shrugged by Ayn Rand
No long comment here. Atlas Shrugged is considered by many top traders required reading. It is the capitalist manifesto. Read it.
Rand’s teachings and writings rooted in laissez-faire capitalism are the ground upon which successful traders should stand:
Rand is more than relevant. Think about this excerpt from Rand’s writing within the context of trading. Are not blindly following your broker’s opinions, listening to David Faber, chatting at Motley Fool, griping at RagingBull.com, trading RSI or watching support/resistance levels all actions demonstrating your choice not to think? Aren’t you allowing your mind to stagnate by evading the pure reality by relying on others to think for you and distort it? Following the hollow messages of other so called experts of trading courts disaster. We are sure all readers know at least one person who went bankrupt in the market by refusing to think for himself.
Trading is a zero-sum game. It’s you against the world. It’s not you and your friend or you and your broker fighting together. You are left to objectively use your mind to determine the best course of action in order pull a profit from the other traders in the world who are competing with you at the game. You must dig deep to understand why one course of action is better than another and avoid decision making based on fear. Pure fear is why the Nasdaq rose so far and plunged so low. And those who controlled their fear with confidence in themselves and their decision-making made a killing.
Why the WSJ Poked Fun and Why It Missed the Point
The Journal’s mockery of Trout for following Rand’s philosophical tenets is revealing in what it assumes: that a serious financial professional who has produced exceptional returns should not take philosophical frameworks seriously, and that Rand specifically is an embarrassing intellectual affiliation. The mockery tells you more about the Journal’s editorial culture than about Trout’s thinking. Trout was one of the most successful traders of his era. The philosophical grounding that supported his discipline and his confidence in independent thought over consensus following contributed to that success.
Galt’s argument is that thinking is not automatic and that the refusal to think courts disaster. The broker who provides opinions, the commentator who provides market color, the chat board that provides tips, all of these are substitutes for thought. They are not supplementary information sources. They are replacements for the analytical process that a trader must perform independently. The trader who accepts a broker’s recommendation without understanding the entry, exit, position sizing, and expected value framework is not supplementing their thinking with better information. They are outsourcing their thinking entirely to someone whose financial interests are not aligned with theirs.
Monroe Trout’s documented track record, one of the best in the history of managed futures, was built on exactly the opposite approach. Rules derived from his own systematic analysis. Independent judgment rather than consensus following. Confidence in a defined process rather than reliance on external validation. These are Rand’s principles applied to trading. The Journal found them mockable. The performance record found them effective.
Frequently Asked Questions
What does John Galt’s speech have to do with trading?
It describes the prerequisite for any kind of productive achievement: active, independent thought. Trading on broker recommendations, message board tips, or indicator signals without understanding the underlying logic is the trading equivalent of refusing to think. It courts disaster because it substitutes someone else’s assessment for a genuine rational evaluation of the situation. The trader who thinks for themselves, builds a system with understood logic, and follows it with discipline is applying Galt’s principle directly.
Why is trading described as “you against the world”?
Because every trade is zero-sum. For every gain there is a corresponding loss on the other side. The broker, the message board poster, and the newsletter writer are not on your side of that equation. They have their own incentives. The only entity in trading that is purely aligned with your financial outcome is your own rational judgment applied through a sound systematic process.
What role did fear play in the Nasdaq rise and collapse?
Fear of missing out drove the rise as investors entered overvalued positions because the crowd was gaining and they feared being left behind. Fear of further loss drove the collapse as the same investors sold at the bottom because the crowd was panicking and they feared losing everything. Both waves of fear-driven behavior were predictable and exploitable by traders with a systematic approach designed to follow price trends and exit when the rules said to exit.
Why is Ayn Rand relevant to trading psychology?
Because her core philosophical argument, that man’s survival depends on active, independent thought, and that the refusal to think courts disaster, directly describes the psychological prerequisite for successful systematic trading. A trader who outsources their thinking to brokers, analysts, and chat boards is making Galt’s exact error: choosing to let their mind stagnate rather than applying it independently to the problem of market analysis. Rand’s framework is the philosophical foundation for the principle of independent systematic thinking over consensus following.
Who is Monroe Trout and why does he appear in this context?
Monroe Trout is one of the most successful systematic traders documented in Jack Schwager’s Market Wizards series. He produced exceptional returns over an extended career running a systematic, rules-based trading operation. His affiliation with Rand’s philosophy was the subject of ridicule in a Wall Street Journal article that focused on a personal lawsuit rather than his trading record. The philosophical grounding the Journal mocked is consistent with the independent analytical approach that his trading performance demonstrates.
How does the zero-sum framing connect to Rand’s philosophy?
Trading is a competitive zero-sum game in which every dollar of profit comes from another participant’s loss. The trader who outsources their thinking to brokers and commentators is competing against participants who have done their own independent analysis. The result, as Rand would predict, is disaster for the one who refused to think. The trader who applies their own objective analysis, builds their own systematic rules, and follows their own process is the one who pulls profits from the traders who chose not to think.
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