Discussion in 'Trading' started by oldtime, Sep 7, 2012.

  1. I was on another forum and somebody was ridiculing intuition. A lot of economists who are deeper thinkers than me state the reason for failure in all economic theories is the inability of economists to predict the resulting action of people to their policies.

    I don't care what method you are using, your underlying assumption is when X happens people will do Y.

    Most mathmaticians on this site have the X factor all worked out, but many of them lack the Y factor.

    No amount of math can help you improve the Y factor in your trading.

    Like the pro poker players say, "To be good, you need to be able to read people."

    or what some of us call intuition, or reading the market.
  2. Redneck



    That which must be paid before receiving the - in - in = Intuition

    Just a little thought to start off the day

  3. nowadays it's Tuition; that which must first be borrowed before the big payoff

    Intuition; The feelig that the payoff may not be as big as they said it would be
  4. In “The Crisis of Global Capitalism” (1998) Soros wrote about his theory of Reflexivity.

    Reflexivity, he wrote, applies to price action (well actually, he just called it “markets”, but us traders know what he meant!).

    He wrote that reflexivity is one of the main reasons that Economists (and the “mathematicians” you refer to) often have such trouble when it comes to forecasting action in traded markets. It’s because the arguments these actors make are based on models that assume an eventual return to a state of equilibrium (i.e. that a market is like a spring that eventually returns to its same equilibrium position if you pull it in one direction, i.e. Hooke’s law).

    Reflexivity states that believing in a return to equilibrium is wrong in many/most market cases. Why? Because the activity in the markets itself affects the beliefs and opinions of actors in the market; and these beliefs and opinions are the beliefs and opinions of humans without perfect information (all of us here on ET being perfect examples! LOL!), with the result that these beliefs and opinions end up being imperfect and flawed (yup! That’s us on ET again!).
    And in turn, these imperfect and flawed beliefs and opinions themselves feedback on the market to affect it in ways that would not have been obvious or predictable from a rational analysis of the original activity that started off the move… the spring rarely returns to the same state in equilibrium.

    The theory seemed to work quite well for Soros …
  5. I stand by my comments
  6. My trading has become so mechanical that I have shut out intuition almost to the point of exclusion. Sometimes it is plain to anyone that this is a special situation and I just ignore it because if you let intuition get too much hold on you the whole trading plan comes unglued.