The more you know , the less you know

Discussion in 'Trading' started by Joe Ross, Jan 29, 2010.

  1. Have you ever felt as if the more you know, the less you know, and the more you become confused? Why is this?

    People have the tendency to believe that the accuracy of their forecasts increases with more information. This is the illusion of knowledge - that more information increases your knowledge about something and improves your decisions. However, this is not always the case - increased levels of information do not necessarily lead to greater knowledge. There are three reasons for this. First, some information does not help us make predictions and can even mislead us. Second, many people may not have the training, experience, or skills to interpret the information. And, finally, people tend to interpret new information as confirmation of their prior beliefs.

    Let me give you an example of how too much information can lead to a paralysis of confusion.

    I met a man who was an avid student of the teachings of W.D. Gann. Gann believed in the movement of prices along a 45 degree angle. He also believed that time intervals of 3, 5, 9, and others had great importance. So the man I knew created moving averages of 3 bars, 5 bars, 9 bars and multiples thereof. Of course, 3 x 9 equals 27 and so he kept 27 bar moving averages. 5 x 9 is 45, and so he also kept 45 bar moving averages. He also watched 135 bar moving averages (3x45) and others. He looked for agreement among all of these moving averages, which of course, led to great confusion, since it was rare indeed and most likely coincidental when all of the moving averages showed some sort of agreement (confluence). So this man suffered greatly from paralysis of analysis. He simply had too much information, and he was unable to pull the trigger on a trade.

    I will never forget the statement he made to me: "Joe, I know so much. Why then is it that I never seem to be making money?"

    I think from the above description you should be able to figure it out, just as I did.
  2. "The more you know , the less you know"

    This is just not true
  3. Nice post, Joe. Cogent.
  4. Stosh


    You have to know what is important to know, e.g., you might know everything there is to know about what you are studying.....but you may not be studying the appropriate thing. Stosh
  5. All those moving avergaes are not more information, it's the same information (historical stock price) presented in a muddled way.

    More information is reading the newspaper, watching CNN, and the like.
  6. 1. Gann used angles for moving averages.
    2. Gann used natural squares to ascertain volatility.
    3. Gann said to wait for a CLEAR indication for a turn.
    4. Gann said to watch volume of sales.

    So if your friend traded true Gann, and used all the rules together, rather than one rule a bunch of times, he would begin to make some money.

    In other words if one has been doing something for 10 years they can build on the knowledge that they acquire, or they can keep using first year knowledge ten times.

    Caveat Emptor
  7. To avoid begging the question. Here is graphic of a correct chart. I do not trade Gann in this way, but this is how his chart is to be set up.
  8. Yes.

    Just imagine a person had absolutely trustable information that at a given day ES will be manipulated from some hypothetical people so it will close at a given number.
    Would he be confused about making trading decisions?

    Problem is that people get their screens and heads full of useless and unreliable information that provides no edge.
    Not the newbies should be blamed for this but the guys that disseminate trading approaches of which they know themselves that they do not really work.

    The feeling of uncertainty is most frequently indicating that there is a true problem. It comes when people don't really have developped a working strategy. Somewhere inside they know that the probabilities are not working for them.

    As soon as you see valid and valuable information things get clear.
  9. This is what Mark Douglas talks about when traders think that vast market knowledge will improve their trading results which is clearly bullshit for the most part. Become an expert at interpreting a few signals and let your system play out.

    When you seek to much knowledge you try to interpret it and this leads to trying to catch every twist and turn of the market which we all know leads to inevitable failure.

    I think this is what you are getting at.
  10. Angles are nonsense. Changing the scale changes the angle. How do you know you have the "right" scale?
    #10     Jan 29, 2010