Trading: Art or Science?

Trading is about making money.

Use any tool at your disposal

make sure the brain at least is one of those tools.
 
Last edited:
I reckon 99% gamble. 0.2% trade according to foreknowledge. 0.8% trade with various degrees of real skills. It's a science for the gamblers. It's an art form for those with skills. It's pure profit for the tiny few who are well connected.
 
Depends who you ask.

There was a lively discussion on Saturday at my house between...

- A guy who has been spending 8 hours a day looking at Forex charts & MACD, Stochastics etc. and said that he felt he was getting nowhere.
- A wealthy retired guy who mainly invests long term but is also a day trader and has been the person I "Idiot Test" all my software on. He's not an idiot but he has this affinity for breaking software and so if he can get it to work, anyone can.
- A professor from Georgetown University who has a lot of published work in the area of the stock market (I am sure Prem won't mind me pointing people to his bio - Prem C Jain)

We left the women downstairs and I took them all "Into my trading room". The goal was to show Craig (the chart guy) that he should perhaps consider something else.

Interestingly, Prem had not really seen this 'dirty end' of trading, which is a total discretionary art. Being an academic in the field, he was very interested. We talked at length afterwards and the aspect he seemed to like most was that it was trading based on understanding the market as opposed to mathematical derivatives. Prem has done a LOT of research into the technical aspect of the market and found no correlations between technical factors and future price behaviour. His experience is that you need to understand in order to be able to trade. I agree but I don't think you need to understand (or watch) everything that impacts the market. Analysis paralysis & all that. He does think that volume is key and you can see that reflected in his work.

On the other hand, Prem did find relationships between fundamental factors and longer term performance. I brought up IPOs & lock in periods and he had a wealth of information to hand on how that impacts prices.

Now - this doesn't mean it's not a science or that science cannot be applied. What it does mean is that someone that has carried out significant research in the technical side of the market, doesn't use that to invest his own money, because he found no correlations.

Of course, looking for correlations in technical information means taking a mechanical approach. This is science. On the other hand, using technical information in a subjective/discretionary manner - that's an art.

At the end of the day, my impression was that the guy doing the stuff with forex charts wasn't convinced that the science way - finding an objective solution to the trading problem - was a dead end.

It is my intention to convert him to the dark side. We agreed to cement our friendship by going for a vasectomy together. That could have been the Heineken talking though...

BTW - If I've gotten any of this wrong abt the people involved - it is the beer and my own bias more than likely...
 
I reckon 99% gamble. 0.2% trade according to foreknowledge. 0.8% trade with various degrees of real skills. It's a science for the gamblers. It's an art form for those with skills. It's pure profit for the tiny few who are well connected.

BJ I must disagree. Most traders end up gambling because they don't put enough work in, anything less than 100% dedication, long hours studying direct markets (is there any other kind) is necessary to give yourself a chance. Imo it comes down to an individual having a certain level of intelligence, (not that high) and hours and hours of hard hard study and screentime. Most traders don't cut it because they totally underestimate what is required to make it. There are no short cuts. IMO the percentage would be 85% work ethic 5% luck 10% skills/temperament
 
Art or Science ?

I guess science implies some objectivity whereas art implies more subjectivity and on that basis the aim may be for it to be as 'scientific' as possible - ie based on empirical evidence as opposed to anecdotal or casual observations and/or gut feel et. This said even from my trading's perspective there still exists an element of discretion (art ?) despite the rule based approach I have built my trading edge around. Keenly observed repeating set-ups over a very large sample coupled to the equally keenly observed repeating and as close to optimum chart conditions as possible for each set-up could be said to be a scientific approach but as stated above the discretyionary element can either add or subtract from the edge but with experience it is more likely to add to it.

If the question relates more to is trading a natural skill or can it be trained ? then the later is probably truer but that is not to say that certain personal attributes posessed by some maybe more suited to the profession than others and give the holders of such a better chance of success over those that have to learn them contrary to their natural urges/state.

G/L
 
Art or Science ?

I guess science implies some objectivity whereas art implies more subjectivity and on that basis the aim may be for it to be as 'scientific' as possible - ie based on empirical evidence as opposed to anecdotal or casual observations and/or gut feel et. This said even from my trading's perspective there still exists an element of discretion (art ?) despite the rule based approach I have built my trading edge around. Keenly observed repeating set-ups over a very large sample coupled to the equally keenly observed repeating and as close to optimum chart conditions as possible for each set-up could be said to be a scientific approach but as stated above the discretyionary element can either add or subtract from the edge but with experience it is more likely to add to it.

If the question relates more to is trading a natural skill or can it be trained ? then the later is probably truer but that is not to say that certain personal attributes posessed by some maybe more suited to the profession than others and give the holders of such a better chance of success over those that have to learn them contrary to their natural urges/state.

G/L

Good post, as usual. Bravo.
 
Interestingly, Prem had not really seen this 'dirty end' of trading, which is a total discretionary art. Being an academic in the field, he was very interested. We talked at length afterwards and the aspect he seemed to like most was that it was trading based on understanding the market as opposed to mathematical derivatives. Prem has done a LOT of research into the technical aspect of the market and found no correlations between technical factors and future price behaviour. His experience is that you need to understand in order to be able to trade. I agree but I don't think you need to understand (or watch) everything that impacts the market. Analysis paralysis & all that. He does think that volume is key and you can see that reflected in his work.

On the other hand, Prem did find relationships between fundamental factors and longer term performance. I brought up IPOs & lock in periods and he had a wealth of information to hand on how that impacts prices.

lol; many academics make the big mistake of trying to predict the price; then conclude that science does not cut it. another example is analysis of cycles using Fourier transforms; which has been tried for decades; since 1900s. it ain't work that way.

It is in their approach lies the problem; and not science itself. it's like trying to prove that chocolate biscuit does not orbit Jupiter. it might be true; but it is hard to prove.
 
Last edited:
Art or Science ?

I guess science implies some objectivity whereas art implies more subjectivity and on that basis the aim may be for it to be as 'scientific' as possible - ie based on empirical evidence as opposed to anecdotal or casual observations and/or gut feel et. This said even from my trading's perspective there still exists an element of discretion (art ?) despite the rule based approach I have built my trading edge around. Keenly observed repeating set-ups over a very large sample coupled to the equally keenly observed repeating and as close to optimum chart conditions as possible for each set-up could be said to be a scientific approach but as stated above the discretyionary element can either add or subtract from the edge but with experience it is more likely to add to it.

If the question relates more to is trading a natural skill or can it be trained ? then the later is probably truer but that is not to say that certain personal attributes posessed by some maybe more suited to the profession than others and give the holders of such a better chance of success over those that have to learn them contrary to their natural urges/state.

G/L

Dennis Richard says it all: "if it feels good; don't do it"

trading is against human instincts. Majority of the crowd lose because they follow their gut. If you want to win; you have to put 110% to it; and don't trade from guts.

assumption: guts = art
 
Dennis Richard says it all: "if it feels good; don't do it"

trading is against human instincts. Majority of the crowd lose because they follow their gut. If you want to win; you have to put 110% to it; and don't trade from guts.

assumption: guts = art

When we are trading we have to learn on how to control the Emotions in trading. Only then we would be able to get a consistent level of Profits which is what every trader wants.
 
It's science and art used together. The science is math. The art is the method of training, your dedicated work ethic etc. you need both science and art to succeed.
 
BJ I must disagree. Most traders end up gambling because they don't put enough work in, anything less than 100% dedication, long hours studying direct markets (is there any other kind) is necessary to give yourself a chance. Imo it comes down to an individual having a certain level of intelligence, (not that high) and hours and hours of hard hard study and screentime. Most traders don't cut it because they totally underestimate what is required to make it. There are no short cuts. IMO the percentage would be 85% work ethic 5% luck 10% skills/temperament

Then you are really agreeing with me. I said 99% of people gamble. You said most traders gamble. So there is correlation.

I further assert that brilliant traders cannot be taught in the same way that brilliant artists cannot be taught. These people start off with the right seeds that would germinate and bosom even if given barely adequate nurturing. While others would fail even if given everything necessary to make them a success.

People are wired for different things. I believe the logical, scientific, and autistic types will never make good financial market traders no matter how much screen time they put into it. Although they may do very well as market stall traders selling fruits, etc. The financial markets are too manipulated to allow logic and science.
 
Last edited:
When we are trading we have to learn on how to control the Emotions in trading. Only then we would be able to get a consistent level of Profits which is what every trader wants.

Trading is quite easy if you just stick to the left side of the chart. Profits are guaranteed.
 
lol; many academics make the big mistake of trying to predict the price; then conclude that science does not cut it. another example is analysis of cycles using Fourier transforms; which has been tried for decades; since 1900s. it ain't work that way.

It is in their approach lies the problem; and not science itself. it's like trying to prove that chocolate biscuit does not orbit Jupiter. it might be true; but it is hard to prove.

I can see how you could come to that conclusion without knowing the guy. He's very grounded & doesn't have his head up his ass. He's also not isolated. For instance when I shoved a copy of "Trading and Exchanges" in front of Craig, Prem looked at the book and said "I know this guy".

This research isn't going in in isolation, either and at this level there are funds paying for advice from people like Prem.

Anyway, where we ended up was:

Prem - Phd, been researching this since the 80's - trades a discretionary approach
Dale - CPA, trader, ex Viet Vet- been through TA and back again - trades a discretionary approach
Pete (errrr... me) - Software Geek - trades a discretionary approach
Craig - furniture factory owner & furniture designer - paper trading but quite convinced a scientific approach will pay off.

The only person with an artistic bent is the only one convinced the sciences hold the key. The reason he is convinced that is because that's what he has been fed in books/da interweb.
 
Art or Science ?

I guess science implies some objectivity whereas art implies more subjectivity and on that basis the aim may be for it to be as 'scientific' as possible - ie based on empirical evidence as opposed to anecdotal or casual observations and/or gut feel et. This said even from my trading's perspective there still exists an element of discretion (art ?) despite the rule based approach I have built my trading edge around. Keenly observed repeating set-ups over a very large sample coupled to the equally keenly observed repeating and as close to optimum chart conditions as possible for each set-up could be said to be a scientific approach but as stated above the discretyionary element can either add or subtract from the edge but with experience it is more likely to add to it.

If the question relates more to is trading a natural skill or can it be trained ? then the later is probably truer but that is not to say that certain personal attributes posessed by some maybe more suited to the profession than others and give the holders of such a better chance of success over those that have to learn them contrary to their natural urges/state.

G/L

Totally agree.

A lot of people think that discretionary trading means just switching on the PC and making punts whenever you feel like it.

My discretionary trading has rules. It's just not all objective rules.

One of my rules is as follows:

If you think the market has turned, look for a pullback approximately the same size as the first one.

Now - on Friday, we had a move up, then a pullback and an additional move up. I was convinced I could now look for a long. Prior pullback was 7 ticks. I ended up getting up after it moved down 4. It wasn't really 'approximately 7' - it was just that it appeared the buyers were absorbing the selling. In the end, it pulled back 6 ticks.

You have rules, it's not random but it's not scientific in my opinion. To me, if it can be programmed, it is scientific. If it is discretionary and you get better at it with practice, it is not scientific.
 
It's science and art used together. The science is math. The art is the method of training, your dedicated work ethic etc. you need both science and art to succeed.

Why is the science math?

Just because there are numbers involved and people try to analyze them doesn't make it a science.

There's people that try to analyze the lottery numbers and make predictions but that's certainly not a science...
 
I can see how you could come to that conclusion without knowing the guy. He's very grounded & doesn't have his head up his ass. He's also not isolated. For instance when I shoved a copy of "Trading and Exchanges" in front of Craig, Prem looked at the book and said "I know this guy".

This research isn't going in in isolation, either and at this level there are funds paying for advice from people like Prem.

Anyway, where we ended up was:

Prem - Phd, been researching this since the 80's - trades a discretionary approach
Dale - CPA, trader, ex Viet Vet- been through TA and back again - trades a discretionary approach
Pete (errrr... me) - Software Geek - trades a discretionary approach
Craig - furniture factory owner & furniture designer - paper trading but quite convinced a scientific approach will pay off.

The only person with an artistic bent is the only one convinced the sciences hold the key. The reason he is convinced that is because that's what he has been fed in books/da interweb.

DT;

a man up his ass? that's a copyright of Bill Maher.

it's not personal dude; we are expressing opinion on the subject matter here.
 
Pete, say hi to Dale for me next time you see him.
I hope he's still winning well his battle against you-know-what ......
 
Top