In yesterday’s post, I described a procedure of reading inwards parallel: reading many books at a fourth dimension too gaining insight into a topic yesteryear juxtaposing the views of many authors. Parallel thinking is primal to blueprint recognition: inwards simultaneously processing multiple events, nosotros are able to discern meaningful patterns connecting those events.
Take a await at Rob Smith from T3 describing his 8 enshroud trading station layout. There are many charts on each screen, grouped yesteryear sector, stock type, etc. He thus tin rank the sack refresh all the screens right away to sentiment many other stock groups based upon screening criteria. Each stock tin rank the sack endure viewed across multiple fourth dimension frames. As Rob points out, he monitors all of these screens throughout the twenty-four hours to larn a feel for when opportunities are “lining up”. Then Rob volition popular off “around the horn”, looking at every stock inwards the SPX to discover emerging trends or moves out of the ordinary.
What is noteworthy inwards the video is that Rob is processing much to a greater extent than information much to a greater extent than speedily than the average trader. He is reading the marketplace much similar I am reading books: finding themes yesteryear processing multiple sources inwards parallel. Instead of examining 1 stock inwards detail, consulting myriad indicators too nautical chart perspectives, Rob considers many stocks too finds patterns that cutting across them.
If y’all jump over to SMB, you’ll notice that their traders are utilizing tools that filter stocks based on liquidity too mass too thus rails promising candidates tick yesteryear tick to discover odd mass or lodge menstruation patterns. The applied scientific discipline acts every bit an extension of the traders’ parallel processing, reducing an impossibly large array of intraday information across stocks to a manageable universe of “in play” opportunities.
Serial processing is mutual amid investors: excavation deeply into exceptional dependent area areas to larn inwards at unique analyses that larn trading opportunities. An example would endure scouring the wording of Fed statements too speeches of Fed officials to discern shifts inwards policy. Parallel processing is less most deep analysis too to a greater extent than most rapid synthesis. It is to a greater extent than mutual amid high speed traders: finding patterns inwards marketplace activity that let out shifts inwards render too demand.
Most of us own thinking styles that are our unique blend of parallel too series processing. An of import root of failure for traders is attempting to adopt trading styles that create non brand optimal purpose of our cognitive strengths. An of import root of failure for trading firms is failing to assess cognitive strengths every bit share of the hiring process. The myth continues that trading success is a business office of personality, land show strongly suggests that personality tin rank the sack arrive at piddling inwards markets if the correct encephalon wiring isn’t inwards place.
Emotions are a occupation inwards trading alone insofar every bit they may nudge us from our cognitive strengths. When trading becomes challenging, higher frequency traders should force themselves to await at to a greater extent than things too feed their blueprint recognition; lower frequency investors should force themselves to retrieve to a greater extent than deeply most what they’re doing too why. Bad things locomote on when active daytraders response to challenge yesteryear slowing their thinking too when investors larn to a greater extent than speedy.
But of course, nosotros don’t listen most whatsoever of that from would-be trading mentors too coaches. They tell us to “trade our plan”.
Oil was weak most the twenty-four hours on Friday. High yield bonds underperformed stocks too thus saw decent selling belatedly inwards the session, every bit sell programs took stocks off their highs. That was a slice of blueprint recognition from yesterday’s trading. When all that began to unfold, my long ES lay came off the table. Not all patterns are meaningful, simply that was a film we’ve seen earlier too I wasn’t inwards the mood to replay. If you’re alone looking at the nautical chart of what you’re trading, it’s tough to encounter those intermarket patterns inwards existent time. Markets are ever talking to each other; it tin rank the sack endure really helpful to bring together their conversation.
Further Reading: Data Rich, Information Poor