sure, good point. So the experienced pilot that landed the airliner in the Hudson river vs the inexperienced pilots that crashed the commuter plane due to icing. So vast amount of experience is one important ingredient of the secret sauce. experience = skill what about other ingredients? what do you think about George Soros back pain warning him there maybe something wrong with his portfolio?
It's a well known and well documented fact that STRESS can trigger migrane headaches, neck pain, high blood pressure and back pain et cetera (many other stuff). Simply, when Mr. Soros worries too much about his portfolio as in STRESSED about it...something in his portfolio is causing that worry and the result is the back pain. Fix the portfolio and you'll remove the stress...resulting in removing the back pain. Mark
Any discussion gets better if there is a lot of peer input. I feel that we are each mostly peers with others since we all bring different experiences to the table. Mechanical systems can be considered complete if several tests are performed. None of those have been mentioned. I liked the comments on trading by byteme and heech. I do not trade like any of the great traders in recorded history. I guess it could be said I took the less travelled road. Composers have little in common with great traders. CS and AI don't apply either as far as probabilistic information theory goes. These comparisons and viewpoints only go so far and that point is fairly low on the performance scale. I guess this means that there is such great opportunity for everyone when this level of performance is used. Any one can take two points on a scale and get a comparison of those two points. As you examine the careers of the famous and successful, look at the change of their performance when it is normalized with respect to the capital they are running at any time. Do a scatter chart of these pairs of normalized points. In terms of knowledge, skills and experience, Anyone can map these important players and their performance. Mechanical systems remove discretion from the picture, however. Some profound examples of market operation can be put on time lines and you can compare what was going on before and after the invention of the use of the computer in making money trading. I use 1957 as the dividing point, personally. Trend monitoring and analysis is a good theme to work through. In this thread the term "analysis" has been used by several contributors. Monitoring and analysis precede decision making and action. I feel that those who have incomplete systems must use "discretion" to fill the voids. If a person were rational and analytical, wouldn't he simply go about filling the discovered voids and put discretion to rest? Could he fill monitoring voids? Couldn't he then fill analysis voids? Wouldn't that enable him to make the five decisions made in trading (Alphabetically listed: enter exit, Hold reverse or wait)? Wouldn't he find the voids soon since only five things were involved. Couldn't he then fill the voids for taking timely action? I took this trip over the years. At some point in this process the PC and printer came into existence. So did real time data beyond the ticker tape (which was availalbe by phone before the PC). Being 100% mechanical is relatively simple (including the big D pieces that most traders handle in being 100% mechanical.) It is my guess that the four steps of becoming expert is where the answers lies. Unconscious incompetence is just the initial state before any learning occurs. No knowledge. No skills. No experience. Just instinct. Conscious incompetence is where the potential trader has scoped and bounded the demands that are being made of his mind. Little knowledge. very few skills. Time has been passing and no experience has been gained to speak of. Instinct has not changed. Conscious competence is where a potential trader begins to extract the offer of the market. He can "see" the market in his mind's eye at least and he is building his mind for trading much as a person would who is able to drive a car with conscious competence. He can take the drivers test successfully. There is no connection to the market's offer and how much money he is extracting. Little knowldege. Enough skills to operate a lethal weapon. No real experience at the time of passing the drivers test. Less instinct is being called upon. A trader at this point rarely has any extensions of himslef that aid him in gaining skills and allow for personal purposeful forwarding experiences. The market is offering a multiple of the ATR daily. there is little relationship to this and the application of capital to make money. Unconscious competence. There are no posts on this level in this thread. This is an unexplored place simply because no one has posted in a way that indicates his mind is differentiated with respect to the market's operation. It is all instinct at this point. In the trading industry, people refer to momentary experiences that they have as aha's, AHA's and larger "religious experiences". Usually they occur in a fixed order as one becomes more and more knowledgable, skilled and experienced. What is going on when a graduate of computer science is thinking about AI or Mozart? It is not having aha's, AHA's nor "religious experiences. Those have not happened so far. Why can't most people even get into the trading ballpark? Do they not use even OODA? Have they escaped beyond OODA to a science orientation instead? Can monitoring be certain? Can analysis be certain? Can decision making be certain? Can taking timely trades be certain? The answer is yes to all four. There is no discretion in monitoring, analysis, decision making nor taking timely action. How does a person acquire and have the use of knowledge, skills and experience? How does he turn his instincts loose and be an expert at last? The quickest pathway is to See one. Do one. And teach one. Trader'sExpo has had some really great sessions of skilled experts trading an assortment of methods. You can see them anywhere you live any day of the week, as well. Any of you can begin to trade once you have had the experience of sitting with an expert long enough. You get to see monitoring done properly. You get to hear analysis done ahead of the market's action. You get to see the trading platform accumulate capital all day long as the expert punches in the trades like driving a car. How and when do experts make mistakes? They do these things before they get to be experts. If you read this, you get to see that it is based on one thing. It is NOT probablitiy. Can you imagine a computer scientist using probability? No you can't. What would be the point of using probability? Probability is only used when a void is being bridged. Voids are like potholes. when you see a pothole, do not fill it with probability or you will not get past the pothole, ever.
bearmountain: It looks like you buy books and read them. There probably is a common understanding that Soros knows what he is talking about when he talks about Soros. That instinct and methodology (theory) are linked was told to you by Soros. You DO understand that Soros can find flaws. This is your thread on discretion and you intorduced the thread from a point of view that came about as an expresion of something, perhaps, being missing in your pictures. A lot of things are missing so far. Soros looks at his performance ALL the time. I believe you understand that, too. you do not look at your environment all the time and that is just the way it is. Soros does because he has great responsibilities. These responsibilities are a resultof knowledge, skills and experience and instinct. "looking for something amiss" is a phrase. For me theory and instinct are beautifully and complexly intrareliable. They are ONE. They completely overlap and are like a mathematic identity. If something is amiss, it is not theory, instinct not the market. the market is always correct is just a statement that everything marketwise stems from the market. Soros is able to find what is amiss since it is not theory, instinct or the market. Thus Soros is allowed to focus on just what IS amiss and deal with it promptly. Soros is never on the topic of discretion in what you speak of above. What can happen in trading is that your position in a market can become at risk. I do not allow trades to be at risk, since it is not necessary. I really do not think Soros does that either. I would say that he is very risk adverse and he knows that theory, instinct and the market are NOT sources of risk. With all of those things out of the picture regarding something being amiss, it is his contemporay positions that are amiss in some way. All things including theory, instincts and the market proceed with an order of events. All are principled in the hierarchy of knowledge, skills and experience. Principles are ground rock solid and unchanging over time. Principles impart the order of events that occur one after another. Acknowledging these things a person gets to know that he knows. there is also an element involved called "acceptance". Soros is explaining to his readers "Soros". For you it is possible that theory, instincts and the markets are not "fixed" by their principles. Consider genius. it has two principles: creativity and the open mind. Soros put together correctly the principles of theory, instinct and markets. this thorough and replete foundation allows him to determine when his trading and investments are "amiss". Simply stated he is acknowledging he missed something in theunfolding of events. I do this by being 100% mechanical in a state of unconscious competence. How is this state communicated? There is the communicator and the reciever. as pointed out to you already it is done in the language of the theory, instinct and market. This language was created long ago and it is easily communicated between competent communicators and recievers. Soros is telling you that he has a triad of resourses. they dictate what IS at all times in the order of events. He is telling you succinctly that he knows that he knows. He can spot very soon when he has missed something in the order of events that puts his position "amiss". No one can easily communicate to you in your language what discretion means in the language of theory, instinct and markets. so far you have not understood that there is a language. The mind CAN deal in this language. The language can be put on the table. The theory can be put on the table. Instinct can be put on the table. Markets likewise. Discretion in trading is shit canned as a consequence. Ask yourself why a CS major cannot perceive of the language of the markets, theory and instinct? Any ATS tuned to these items can extract the markets offer on any fractal in any market as long as the market is liquid. ATS's do not have discretion nor to they experience noise nor anomalies.
Thank you for your post. I think I understand about 50% of it! Regarding George Soros, Flavia Cymbalista as a phd candidate studied Soros and subsequently met with him. I am trying to resolve the conflict created by discipline of following ones rules and gut feel. There is some evidence that successful discretionary traders are able to do this. So, I need help in resolving this conflict: how to blend 100% mechanical strategy with gut feel in real time trading. I believe after years of experience, gladwell says 10,000 hours, one develops some "X" faculty of the mind. However for me and most other discretionary traders, our limbic system short circuits it. Zen mystics call this X faculty 'it' (zen in the art of archery) from Flavia: Traders have always been told to stick to their trading methods. Success, theyâre told, requires discipline, which means overriding your gut. No wonder â gut feelings are notoriously unreliable. Few traders know how to separate them from emotion and turn them into reliable knowledge. The advantages of an accurate gut are indisputable.
It's not "gut". A successful (read consistently profitable) discretionary trader has developed that "muscle memory" in his brain to recognise the trades and execute them in a timely manner without needing a lot of thought. This is a pure reaction to the picture he sees and is based on the almost instantaneous information processing. There is no gut, no inuition. That's all BS. It's a matter of having trained youself through back testing and forward testing and pure trading experience. There is no magic, for 99.9% of CP traders, it was just hard work. There may be that 0.1% who were born to it.
If I understand you correctly, I believe you are describing 100% mechanical trading by a discretionary trader. following ones rules, implementation of 'smart rules' learned via experience, testing etc. However the discretionary trader is UNCONSIOUS of it, and does it AUTOMATICALLY. Or is there more? To state my problem: ALWAYS follow your trading rules, but KNOW when to break them. Thanks.
I'm glad you pinpointed your view of "conflict". rules vs. gut. Most potential traders have feelings. Most common are: anxiety, fear and anger. Anyone can examine their feelings when "in" the market or "out" of the market. Most people have two sets of feelings. Mostly they use entry/exit strategies. Over the eons, mankind has developed ways that provide for a rational existence. This may be described as support, comfort and confidence type feelings. Humans usually are in a state that is way beyond survival. Flavia indicates that there is a progression in knowledge, skills and experience. It is clear to me that this is true. The goal, from my point of view is to have a complete theory,to have complete knowledge of how markets work, and, finally, to have my mind and its instincts operate in synchronicity. Notice that I don't use rules but instead I have a complete set of inferences. Trading with capital in the markets is the name of the game. You may notice that the big players have all their capital in the markets all the time. Flavia points out how trading in a state of no conflict is superior. You point out the 10,000 hour myth. In a relaxed way consider the following. What you see as you monitor is a visual sensing. Somehow, in your mind, you think you have rules for trading. Draw a pictogram of these things. Put seeing on the left and rules in the right half near the middle dividing line. On the right add the words: "take profit segment". For me there is a vertical slot in the picture that runs from top to bottom of the pictogram and it is labelled inferences. I have an inference for everything that I could be sensing visually or by sound (in olden times, telephones also had the floor noise in the background). Sensing combines with inference to yield an output called perception. Sensing is 10% and inference is 90%. Suppose you fill in all the missing pieces of the pictogram so you have a diagram that shows how you take profit segments. The inference slot is filled with pieces and they are all organized by the work the mind does to organize them. Theory contributed pieces; knowledge of the market's operations contributes pieces; instinct contributes pieces. There are many pieces contributed from non trading sources, as well. In terms of driving a car, you use sensing and you have a fully filled in slot from top to bottom for inference. You combine sensing and driving inferences to alway "know that you know. Always knowing that you know is called perception. I driving you have knowedge and skilols and experience. these three things are what fills up your "inference" slot for driving. Hving it complete makes driving happen at the level of unconscious competence. Soros is an expert. Flavia is not an expert at anything and especiallly not trading. This thread is a discussion of what it is like for a person to not have much inference available when trading is done. They do have eons of instincts availalbe, however. Incomplete trading inference and trading instincts are in conflict for you and you pinpoint this. your trading instincts did not originate with you through learning about trading. They came form eons of human survival. by bringiong into play the 10,000 hour myth where do you wind up? You wind up letting your inference develop around situations frought with fear, anxiety and anger. Part way through this 10,000 hours, discretionary behavior and thinking comes into the picture. It is a pothole filling process that is an experiential learning process at the rate of real time passing during RTH. Anyone can go through a 6 1/2 hour day or trading in 40 minutes if they are using a video of a day and can fast forward during parts of the day. Hastening an ill chosen method of gaining experience will not be helpful. Soros has a correct theory, a correct knowledge of markets and he has excellent instincts. So WHAT happens with Soros? He senses. His inference is total and complete. Unconsciously his sensing and inference combine to yield PERCEPTION. Soros now has his monitoring complete and he knows that he knows. This is his input for analysis. Soros does analysis with respect to his positions. He DECIDES, then, that something is amiss. He is doing conflict resolution at the correct place in trading. His positions are amiss with respect to what the market has done and the theory he uses and thei nstincts he has which are in concert (See Flavia) with theory and market operation. He corrects his positions to align them with what is correct for that moment. In the simplest aspect, a market positiion is one determined by the category of all the above. What is that category called? What are instincts based upon that took eons to create? What is theory based upon that is the common public knowledge? What is the common market knowledge based upon? Everything that survives in the world and everything that is created out of the pieces is what and how your mind operates. People who come to markets to make money, commonly fail. They try to learn to make money and if they are not skilled nor knowledgeable and have undifferentiated inference, they use survival instincts and they survive by their minds and bodies getting them far away from the markets. Traders who "freeze" are exmples of traders who bodies and minds are taking them away from the markets. Before 1960, I started explaining to others how I gained my wealth. They observed that I was FREE. They saw I could choose anything I wanted or needed. I didn't do the 10,000 hour myth. There is but one totally integrative thing that gives the potential trader prowess and the ability to extract the market's offer. Allow your mind to consider the pieces. Your mind will put the pieces together. That is one of the jobs of the mind. It happens mostly when you are sleeping. For me, I read 7 pages of a book where the relationship of the market variables was stated in terms of science. I was literally surrounded by this thing as well. Logic. Everything about the market variables is processed through logic. When you partner with the markets to extract capital in segments, you have to use the inference created by the theory, the market operation and your human instincts; it is simply a noise and anomaly free system containing a structure, processes and "a taking" of the market's offer.