"The Emotions of Math"

psytrade · Jun 22, 2006

Im detecting some volalitility in the Tide contract and the Pepsi bond in aisle 2, can I get a price check please?

rossmedia · Jun 22, 2006

Ozzy,

Yes do that. The bottom line is there is no need to re-invent. Prices are all-around us. There is a reason the biggest, most profitable corporations are just that. They understand the emotional component of the consumer all too well.

If you just sit back, open your eyes and look around you, when you return to your level 2 you'll be surprised at what you now see.

-Ross

ElectricSavant · Jun 22, 2006

I remember taking a business course somewhere...

The fastest path to increase profits is to raise prices...

The increased "volume thingy model" due to lower prices...just did not compare..

rossmedia · Jun 24, 2006

In an attempt to consolidate my views on this topic, I think the following adds needed lucidity to my conclusion. As traders I believe we do well to explore further the origin of what we consider objective stats or pure mathematics.

If you view emotions as water everyone has it. From water some get ice, some steam, some irrigation, some sanitation, some energy etcâ¦the question is then are any of these derivatives âpureâ or better said which of the water derivatives are absolutely, inherently void of water, or at minimum the influence of water?

More practically, stock options, while not stocks, cannot exist without their underlying parent, we are then comfortable with the fact the underlying has a direct influence on its derivative. Yet when it comes to statistics, math etcâ¦we treat these units of measurements as if they are not a derivative of the things, persons, or events they represent. This is a mistake. Math, in all its forms, is necessarily a derivative of the pre-existing events they seek to permanently quantify.

-Ross

scalper21 · Jun 24, 2006

Quote from rossmedia:

The natural question is can one be a very succesful trader, in today's market, simply by looking at price behaviour? No charts, no fundamental research, no objective analysis, just watching numbers go by and trading off feeling...

Without experience I don't think so, but for the experienced trader sometimes the best thing to do is now simplify and trade off what it took years of looking at patterns to recognize. My basket has become such a part of me that I don't need to look at any of their charts...each number along the price scale has its own name and your can recognize them as they go by.

Just my observation.

-Ross
More...

I agree with your comments 100%. The clarity of your writing is symbolic of someone who has walked the walk.

scalper21 · Jun 24, 2006

Quote from rossmedia:

As trading becomes increasingly more statistical in nature one must acknowledge the birth of another question, what is the nature of statistics? I am rapidly approaching an interesting conclusionâ¦emotions.

The general belief that systematic, analytic models are less emotional than discretionary trading is fundamentally flawed. Statistics, in any discipline, are a 2nd mover...the 1st being the cumulative human actions that stats must, per se, be based upon. So then stats, probabilities and the like simply quantify the most ubiquitous element of human nature, emotions. This suggest that equations, assessments, and even math itself is deeply rooted in emotions, for without such they cannot noticeably exist.

The math market, or stock market as many prefer to call it, is the finest example of mathematical emotions. Black boxes simply do a better job, at times, at recognizing the patterns of past emotions without compounding trading decisions with the convolution of real-time emotions. The vacuum of code then is advantageous because it minimizes the indecision or delay oneâs nervous system causes even for the most robotic of traders.

A moderate embracing of our emotions as traders may result in more profitable trading than ignoring the same to become more âroboticâ, for even robots have human creators.

The stock market has no abstractions, or haphazard components, only actions and re-actions that are perceived as such to the mechanically bent trader.

Any suggestions, disagreements, and thoughts are very much welcomed.

-Ross
More...

I am a discretionary trader. I would like to dissect this discussion from my trading universe. I do not use trading systems. I simply trade actively and make money.

First things first what I am going to say might be off topic, but here it goes.

From my standpoint a trader must separate "emotions" and "intuition".

For example I trade ER2. My TT(Trading Technologies) workstation has three MD Trader windows open ES(S&P 500),ER2(Russell 2000), and NQ(Nasdaq 100). I look at these order books to make my trading decisions. When I make a trade it is an "intuitive" feeling that I can make money. It is almost like my brain is calculating all the stimuli on my TT workstation and when the right situation is their I strike! I would not call this "intuition" an emotion. However it takes great courage, excitement, energy, concentration to follow this intuition.

For me during the trading day there are good and bad "emotions". The good emotions are the excitement I feel when the trading day begins. The feeling of contentment when I am focused on the market, and seem to be in the flow. The bad emotions are the ones that take me out of the present moment.

Ross I would like you to dissect my comments and tell me if my experience fits into your discussion. I understand you guys want to talk about math and trading systems, but how about the trader like myself that believes his "intuition" is the best and only system he needs. How do I fit in your discussion?

I have to say I have enjoyed reading your post!!

aPismoClam · Jun 24, 2006

math...emotions? how about: math...laws of nature? emotions are how people react to the things that math measures.

TSGannGalt · Jun 25, 2006

Read this and come back...

http://www.atlasshrugged.tv/speech.htm

dandxg · Jun 25, 2006

Rossmedia, you make mention of black boxes being able to out peform emotional beings right?

I can agree with that, but answer me this one question. How does a blackbox handle a terrorist attack where the market freakin tanks? No discretion right? After all it is a black box that can't think.

Is there some perfect coding that factors in trading right in front of a major econonic report? North Korean missle crisis ? I just have a hard time believing that a black box can handle these situations, but I am new and willing to listen if someone can demonstrate otherwise.

On the other hand, the black box can execute without emotion and fear so there are the pros and cons as I see it.

dandxg · Jun 25, 2006

Scalper 21, I am new and maybe that's why, but how can one interpret anything of the ladder when there are so many bluffers pulling orders left and right. I have used TT too and know you can see counterparty, but still that's impressive if you can trade sucessfully off of that.