The late Ayn Rand emphasized that philosophy was the most practical of disciplines: it governs the ideas that lie behind all we do and think. The philosophical premises we assume affect how we approach trading.
A beautiful example of this is David Aronson’s new book, “Evidence-Based Technical Analysis”. It’s a well-written, thought-provoking text, with many practical examples of how to conduct data analysis in an objective way.
Starting with the premise that knowledge consists of statements that are found to be true, Aronson, writing in the positivist tradition of philosophy, excludes subjectivity as knowledge. He explains:
“The most important consequence of TA adopting the scientific method would be the elimination of subjective approaches. Because they are not testable, subjective methods are shielded from empirical challenge. This makes them worse than wrong. They are meaningless propositions devoid of information. Their elimination would make TA an entirely objective practice.” p. 148
This is bound to rub many traders the wrong way, but it’s an important challenge. What is knowledge? How do we know what we know in the markets? How can we demonstrate that knowledge is such, and not illusion? (more…)
Archives of “illusion” tag
rssPaul Tudor Jones Quotes
I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.” …
“I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have” ..
The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.
Ninety-percent of any great trader is going to be the risk control.
When trading macro, you never have a complete information set or information edge the way analysts can have when trading individual securities. It’s a hell of a lot easier to get an information edge on one stock than it is on the S&P 500. When it comes to trading macro, you cannot rely solely on fundamentals; you have to be a tape reader, which is something of a lost art form.
These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates the illusion that there is an explanation for everything and that the primary task is simply to find that explanation. As a result, technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust the price action. The pain of gain is just too overwhelming for all of us to bear
Surfer vs Gambler
The ocean and the markets have many things in common. For one, they are both a dynamic event that is constantly in flux, and from the average traders point of view, beyond any possibility of manipulation. It is what it is; it will go where it goes.
This analogy works if we consider the mindset of a surfer. He knows that he is in a passive relationship to the sea, yet he also knows that he can develop a skill in relationship to its ever changing movements in order to reward himself. The surfer cannot demand anything from the sea, he can only wait for it to present him with an opportunity and engage it when the time is right. To go in during a total calm or a tsunami would be both equally foolish; he must wait for the conditions to be right. (more…)
Evidence Based Trading: Why Philosophy Matters
A beautiful example of this is David Aronson’s new book, “Evidence-Based Technical Analysis”. It’s a well-written, thought-provoking text, with many practical examples of how to conduct data analysis in an objective way.
Starting with the premise that knowledge consists of statements that are found to be true, Aronson, writing in the positivist tradition of philosophy, excludes subjectivity as knowledge. He explains:
“The most important consequence of TA adopting the scientific method would be the elimination of subjective approaches. Because they are not testable, subjective methods are shielded from empirical challenge. This makes them worse than wrong. They are meaningless propositions devoid of information. Their elimination would make TA an entirely objective practice.” p. 148
This is bound to rub many traders the wrong way, but it’s an important challenge. What is knowledge? How do we know what we know in the markets? How can we demonstrate that knowledge is such, and not illusion?
Once we start with the premise that all knowledge consists of explicit propositions that can be tested for truth, we necessarily are led toward trading that is rule-based and rigorously backtested.
Is there another, *valid* form of knowledge and trading? Can we prove that?The late Ayn Rand emphasized that philosophy was the most practical of disciplines: it governs the ideas that lie behind all we do and think. The philosophical premises we assume affect how we approach trading.
Surfer vs Gambler
The ocean and the markets have many things in common. For one, they are both a dynamic event that is constantly in flux, and from the average traders point of view, beyond any possibility of manipulation. It is what it is; it will go where it goes.
This analogy works if we consider the mindset of a surfer. He knows that he is in a passive relationship to the sea, yet he also knows that he can develop a skill in relationship to its ever changing movements in order to reward himself. The surfer cannot demand anything from the sea, he can only wait for it to present him with an opportunity and engage it when the time is right. To go in during a total calm or a tsunami would be both equally foolish; he must wait for the conditions to be right. (more…)
Ten Points for Trading Awareness
1. FEAR
2. LISTEN TO THE MARKET
3. ACCEPT RESPONSIBILITY
4. GREED
5. FRUSTRATION
6. REGRET
7. CONFIDENCE
8. PROSPERITY CONSCIOUSNESS
9. SECURITY ILLUSION
10. WRITE IT DOWN