Trading with objective/subjective choices

Discussion in 'Psychology' started by gar16ald1, Nov 24, 2017.

  1. gar16ald1


    Hey guys, I was wondering if your trading decisions are based on objective and/or subjective decisions. For example, if a stock became bullish would you choose to buy based on what your indicators are telling you, or would you buy based on your own opinion as to where it's heading.

    It's hard to completely rely on just indicators for making a decision as they aren't very accurate. On the other hand, your opinion doesn't really mean anything. I guess that being stuck in analysis paralysis doesn't help either, but at the end of the day the direction that you choose HAS to be determined by something, whether it's through external information or an internal belief.

    Would love to hear your thoughts.
  2. tomorton


    Everything based purely on charts. I only use MA's on the charts, no off-chart indicators.
  3. Indicators & the general trend.
    gar16ald1 likes this.
  4. Chris Mac

    Chris Mac

    All trading decisions are by essence subjective.
    We are not God, we don't have perfect information.
    So glass is not half empty or half full. Glass is half empty and half full.
    If you understand that, you will succeed, because whatever the issue, you will be able to adapt. Flexibility is key.
    On the other side, your money management and risk control must be rigid. Same process, same target, same stops, same discipline.

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  5. tomorton


    To my surprise, Master Po, I half agree. My trend assessment criteria are rigid but my entry signals are really vague. I'm basically going to use any excuse and half a candlestick pattern to get into a trend if I rate it highly. Of course, this means I'm in some trends early and some even later than usual but hey ho.
    Chris Mac likes this.
  6. Sprout


    If a subject is the observer and the object is the thing observed, an object doesn’t make a decision only the subject can. The action of observation is solely within the subject’s domain.

    To apply this to trading and the idea of analysis paralysis, a sweeping of your objects of observation per timeframe will generate a dataset. Using a process of logging this dataset with the end result being a decision of ‘continue’ or ‘change’ will create a matrix of correlations. The decision’s could be wrong in retrospect but that’s part of the process - to review the accuracy of the timely decisions.
    In other words practice deciding in every bar (one timeframe higher than the timeframe you trade) what the right side of the market is, log it and review.
    Reviewing builds the skill of discernment of what’s important to look at and when.
  7. qxr1011


    what is objective/subjective decisions?

    i would call the decision objective if it is based on the discovered real laws of nature ( like the Earth is round).... [in our case correct undesrtanding of the laws of nature of the market]

    subjective decision is based only on our perceptions (like the Earth seems flat :) )...[without knowledge of the laws of nature]

    ====For example, if a stock became bullish would you choose to buy based on what your indicators are telling you, or would you buy based on your own opinion as to where it's heading===

    indicators or other aspects of TA should be set up the way to reflect the real laws of the market (and one should find and define those laws... which most never do), and trader definitely should follow his instruments

    trader's opinion should be based not on the gut feeling but on what his instruments (indicators, trendiness, etc, which reflects the assessment of the situation based of laws of the market) tell him

    one does not rely on the felling flying plane at night (that's how accidents happen), one should have correct set of instruments...and know how to read them
    gar16ald1 likes this.
  8. tommcginnis


    I used to teach a lot of benefit-cost analysis in business schools (pretty much every class had some component in there...), and it would always crack me up to hear the empiricist declaration, "But isn't this just all *silly*!!! We can't *possibly* know all there is to know about this and pack it all into a benefit list or a cost calculation!!" And so we should just Give up?!? was my reply.

    The goal of benefit cost analyses is not to lay down a dollar on one side or the other, but to clarify and even enumerate those costs and those benefits for which we have data -- leaving the rest for our subjective(s). We just need to get our (empirical little) arms around what are sometimes *huge* questions.

    It's the same thing in trading: we can even seek to enumerate every possible decision point -- that's what is done in preparing a trading algorithm. But even setting the decision points has an increasing degree of subjectivity once you try to optimize on too many variables. It's just mathematically impossible. So, we enumerate where we can, clarify as we need to, and hope the system that results is one that won't leave us doe-eyed and deer-in-the-headlights unmoving+indecisive when the market pulls a one-and-a-half-Gainer-with-a-twist on a day when we least expect it.

    “I do believe in simplicity. It is astonishing as well as sad, how many trivial affairs even the wisest thinks he must attend to in a day; how singular an affair he thinks he must omit. When the mathematician would solve a difficult problem, he first frees the equation of all incumbrances, and reduces it to its simplest terms. So simplify the problem of life, distinguish the necessary and the real. Probe the earth to see where your main roots run. ”

    Henry David Thoreau
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  9. 80 percent objective and 20 percent subjective. I dont use indicators just price action and rigid entry and exit rules.
    gar16ald1 likes this.
  10. NeoTrader


    #10     Nov 24, 2017