If appearances were accurate guides to reality, nosotros all would brand a ton of coin inwards markets. The challenging truth of the affair is that our cognitive biases ensure that what is apparent is non e’er what is existent together with true. Often, nosotros receive got to stride dorsum from our analyses, halt watching screens, together with really brand an travail to see. It is past times stepping dorsum that nosotros tin post away synthesize our observations together with become far at fresh conclusions.
This is a topic I took upward inwards the recent podcast interview with Andrew Swanscott of Better System Trader. He’s assembled a nifty lineup of interviewees inwards his podcast serial together with did an fantabulous undertaking of preparing for the session with his ain questions together with those from listeners. We tackled the topic of creativity, with others, together with the importance of opening the hear after focusing the mind.
Several traders I know engage inwards intensive nautical chart reviews prior to the trading 24-hour interval together with week. They await at many charts at dissimilar fourth dimension frames, oftentimes non spending a huge amount of fourth dimension on each, but definitely watching inwards a highly focused solid set down to discovery detail.
Initially, I was skeptical of this practice, because I’m non convinced charts, inwards together with of themselves, receive got a nifty bargain of predictive value. Because these were consistently successful traders, however, I knew that I should accept their routines seriously. The odds were proficient that something of value was derived from the exercise.
As Ayn Rand would receive got counseled, I should receive got checked my premises. These traders weren’t inwards the work organization of making predictions. They were attempting to *understand* what was happening inwards markets. So what did they attain from their nautical chart review?
* An thought of trending: what was moving directionally together with what wasn’t; what was breaking out together with what was inwards a placidity range;
* An thought of context: was the recent displace purpose of a larger tendency or range?
* An thought of volatility: were markets showing to a greater extent than or less motility over time?
* An thought of correlation: which markets or stocks were moving together? Which correlations were breaking down?
All of these ideas were valuable, but what was close valuable was what came afterward. The traders lay aside their charts, stepped back, together with exactly pondered what they had observed. Many times this occurred spell taking a walk or relaxing inwards a chair. What they were doing was looking across the charts together with finding themes together with patterns that made feel of their observations. It was those themes together with patterns that gave them their merchandise ideas.
Collecting together with connecting puzzle pieces occurs inwards a dissimilar solid set down of mind–a dissimilar workflow–from seeing the movie beingness assembled. The deep await into things has to hold out followed past times a wide await across things. Stepping dorsum allows us to run into a larger picture, but if nosotros don’t precede the stride dorsum with intensive focus, we’ll receive got no puzzle pieces to connect.
Look into the charts. Look across the charts.
Look into the data. Look across the data.
Creativity lies at the intersection of microscope together with telescope.
Thanks over again to Swanny for the chance to part ideas with traders.
Further Reading: The Role of Cognitive Style inwards Trading Success