Does trading require talent?

[grantx]

Mr Cassandra,

“there probably is a better avenue waiting for you.”

Initially, this struck me as being depressingly real. Taken to its logical conclusion, one could spend a whole lifetime searching for the “better avenue”. In a trading context this could mean, if you are not making £x per week/month, move on. But there are two points which, for me, are just as important: happiness, sufficiency (could be interrelated or independent)

A recent thread was based on a premise something like, if you didn’t rank in the top 10%, you’re a failure. Let’s assume your weekly total household expenses – mortgage/rent, school fees, food, bills, etc are £500 pw. If you make £1000 pw trading you won’t be interviewed for the FT but you’ll have a comfortable life.

Also assume you are happy with the self-employed trading regime (no more bs from the boss, inter-office politics, dog-eat-dog, etc). Perhaps in your previous employment you earned £2000 pw but you were continually miserable. But which is preferable? Better is fine for me (which also includes improvement if sought), best is for those whose value system is that of others.

Grant.

 

[PKFFW]

^^^^

Great points grantx.

Cheers,
PKFFW

 

[nine]

Pardon my ignorance too sir, but I am not well versed on the Turtle phenomenon. I only understand that two accomplished traders had a bet with regard to trading & talent - indeed the very topic of this thread, and I'm sure a question always at the back of most traders mind.

I also understand that each then set out to prove the other party wrong. They advertised and signed up the butcher, the Baker, and the Candlestick maker. They then trained them, and they all became successful traders, the bet was determined, and the rest (as they say) is history.

Given that this is something that I have no doubt is broadly the reality anyway, I wasn't particularly drawn to any official publication, or particular Biography. So I cannot comment either way on any "edge at the time". Maybe I should buy the book, or better still remind somebody christmas is coming !

The "butcher, the Baker, and the Candlestick maker" is too strong. They were selective in their sign up.

If one was to get scientific about this then the tests wouldn't hold up as proof that training was enough (blind trials, selectivity etc). But for us as traders its probably important to note that the traders were trained in execution of a longish term computerizable (nowadays at least) system. I for one am not convinced that this test covers the gamut of trading strategies. I think its worth considering that it might be possible to train well in some, especially longer term highly mechanical strategies, but others might benefit a lot from a bit of talent.

 

[new_trader]

2¢

Mr Cassandra,

“there probably is a better avenue waiting for you.”

Initially, this struck me as being depressingly real. Taken to its logical conclusion, one could spend a whole lifetime searching for the “better avenue”. In a trading context this could mean, if you are not making £x per week/month, move on. But there are two points which, for me, are just as important: happiness, sufficiency (could be interrelated or independent)

A recent thread was based on a premise something like, if you didn’t rank in the top 10%, you’re a failure. Let’s assume your weekly total household expenses – mortgage/rent, school fees, food, bills, etc are £500 pw. If you make £1000 pw trading you won’t be interviewed for the FT but you’ll have a comfortable life.

Also assume you are happy with the self-employed trading regime (no more bs from the boss, inter-office politics, dog-eat-dog, etc). Perhaps in your previous employment you earned £2000 pw but you were continually miserable. But which is preferable? Better is fine for me (which also includes improvement if sought), best is for those whose value system is that of others.

Grant.

Grant,

IMO: It is very dangerous for an aspirant to think that the level of understanding, proficiency, effort, study and practice is proportional to the amount of money they want to make.

 

[temptrader]

Well, I disagree. Nature and specifically evolution supports my argument. Nobody showed early humans how to create and maintain fire or use tools, they had to work it all out for themselves. Here we are now, not necessarily the culmination of biology, but certainly at the pinnacle of intelligent life on earth. There are no cat computers or kangaroo rockets and a cow will always act like a cow regardless of it's environment. If that isn't an example of biology setting limits, what is?

Agreed, human beings are bounded by biology.

As for "genius" about requiring hard work and discipline look no further than history to confirm what I said. If the field is in its infancy then maybe you don't need to do much work to get started. All the great mathematicians had to learn from the previous masters, the only notably exceptions are in graph theory in the 1960s where boys still in their teens were making important contributions after only a few years of study.

IMO: People misuse the word "genius" when describing a person's ability to perform certain tasks. You are mistaken when you say people can change their IQ, they can't really. What they can do is improve their score on IQ tests. You cannot escape biology which sets the maximum limit of intelligence at birth, as a result you cannot actually increase it, you can only exploit flaws in the way it is measured.

that's my understanding too. Also IQ tests are bad measures anyway, but the concept does persist that there is a limit to one's ability, I don't think there is much argument about that.

Knowledge and intelligence are two different things altogether. Having "encyclopedic knowledge of their fields" does not make anyone a genius. Genius is a measure of the "raw" processing power of the brain and generally denotes an exceptional natural capacity of intellect and creative originality in areas of art, literature, music, science and mathematics.

Sufficient conditions? They are not conditions at all, not even close. Generally, genius is a term used to describe a person’s intelligence as measured by a standardised intelligence test. Genius alone does not guarantee success in any endeavour just like hard work and disciplined study alone will not. In certain endeavours you need both if you want to succeed.

In regard to trading, I think these definitions of genius are highly appropriate:

- Genius is the ability to independently arrive at and understand concepts that would normally have to be taught by another person.

- This genius is a talent for producing ideas which can be described as non-imitative.

On one hand you say they are not sufficient conditions, on the other you say you need "genius" and hard work and discipline if you want to succeed in certain endeavours. Logically you've agreed with what I said and miss understood me. There are many people who are artistically gifted but if they never get a chance to paint them their "genius" doesn't come out.

I think the concept of "genius" is a gross simplification of a very complex subject. In firewalker's links we see people "improving". I remember something that Van Tharp said about trading (I don't like van Tharp by the way simply because he makes his money by writing books and NOT trading), but he gave the analogy that if we were to run a marathon we can improve our personal best, but there'll be a point where it cannot be improved because we've reached our limits, and there are exceptional people who will always have better times.

If Firewalker ever bothers to meet some of these people who are described as "geniuses", he'll see that they are usually socially awkward, suffer from mental health disorders, find it difficult to relate/communicate to the general population, etc . . . because that seems to be the price that you pay for this. Not all of them of course, but most of them.

 

[temptrader]

Mr Cassandra,

“there probably is a better avenue waiting for you.”

Initially, this struck me as being depressingly real. Taken to its logical conclusion, one could spend a whole lifetime searching for the “better avenue”. In a trading context this could mean, if you are not making £x per week/month, move on. But there are two points which, for me, are just as important: happiness, sufficiency (could be interrelated or independent)

A recent thread was based on a premise something like, if you didn’t rank in the top 10%, you’re a failure. Let’s assume your weekly total household expenses – mortgage/rent, school fees, food, bills, etc are £500 pw. If you make £1000 pw trading you won’t be interviewed for the FT but you’ll have a comfortable life.

Also assume you are happy with the self-employed trading regime (no more bs from the boss, inter-office politics, dog-eat-dog, etc). Perhaps in your previous employment you earned £2000 pw but you were continually miserable. But which is preferable? Better is fine for me (which also includes improvement if sought), best is for those whose value system is that of others.

Grant.

I haven't been back to work for 3 months now. Trading my own account. First time was really scary because I was not use to $5 a point on the DOW via IB, took a week or two to get use to it.

In my previous job I was on about 55K - 60K a year as a boring, tedious programmer. I could have stuck it out for another 5 more years and go contracting to get the 2K a week as you mentioned, but it wasn't the life for me. Even though I'm not making much now I enjoy the free time trading gives me.

 

[firewalker99]

If Firewalker ever bothers to meet some of these people who are described as "geniuses", he'll see that they are usually socially awkward, suffer from mental health disorders, find it difficult to relate/communicate to the general population, etc . . . because that seems to be the price that you pay for this. Not all of them of course, but most of them.

I respectfully submit that such a comment is a generalization based on nothing but anecdotal evidence. There are (obviously) cases that will support what you are saying. But as much as I realize that we'll all remember seeing or hearing of the stereotypical "autistic savant", I doubt there's much scientific proof to say that the traits you described affect "most of them".

As a reply you'll probably show me some famous geniuses who suffered from Asperger's syndrome... and such a syndrome will effect people in certain ways so that can behave more or less differently under given circumstances. However, people with it are usually much better at staying hyper-focused or focused for prolonged periods of time. They also are quite persistent workaholics. This in turn confirms what I've been saying from the beginning, that in fact the need for hard is a primary factor on the road to success.

Could it not be that we ourselves -not them- find it difficult to engage in useful conversations with these people hence creating the exact atmosphere that causes geniuses to be more introverted personas (although I'm probably guilty of making a false generalization here myself) thus avoiding social interactions? Mind you, I'm not exactly a "small-talk" guy neither...

PS: "If Firewalker ever bothers to meet some of these people"... I actually know somebody who is extraordinarly ******* in some way. Sorry I had to type ****** because the words "gifted", and "talented" came to mind and as you know, I'm not a believer of those. It seems that language itself drives us towards thinking in one direction.

 

[firewalker99]

IMO: People misuse the word "genius" when describing a person's ability to perform certain tasks. You are mistaken when you say people can change their IQ, they can't really. What they can do is improve their score on IQ tests. You cannot escape biology which sets the maximum limit of intelligence at birth, as a result you cannot actually increase it, you can only exploit flaws in the way it is measured.

...the concept does persist that there is a limit to one's ability, I don't think there is much argument about that.

As you guys "seem" to be agree, I think there's an important difference in opinion.

I agree there are limits to one's ability (I never stated otherwise). Will we ever be able to sprint the 100m in under 5 seconds? I doubt it.

new_trader however argues that the (intelligence) limit is fixed at birth. My point is, we are not limited to our physical abilities by birth, so why would our mental abilities be limited? If are muscles are flexible enough to grow to 5 times their normal size why can't we train our brain in a similar way? Why would we otherwise encourage elders to keep practicing their memory unless we believed these exercises do help preventing early stages of dementia?

Let me remind you of one particular experiment. Researchers tried to see how much digits a person could remember. You can try it for yourself: try to memorize this for a minute and see how much numbers you got right: 45065408946541.

Most likely you'll have put the numbers together into groups (called "chunking"). Would you say 15 numbers is the maximum you can remember? Okay, 20 if you trained really hard? 25? How about 40? Because that's how much psychologists Miller trained his subjects to remember. Only recently I read about students managing 70-80 numbers without a problem (can't seem the dug the article up right now, but I'll post the link later if I find it). Anyway, these are only examples of what can be done in a short period of time. Can you start to imagine what could be realized over a prolonged period of intensive deliberate practice?

Perhaps we should call this thread "nature vs nurture"

Allow me to quote somebody:

"Genetic determinism isn't a growing theory but a fading one. The public -funny how we see that word again - hasn't caught on to this yet but continues to cling to an outmoded, scientifically false view. "​

 

[Sai]

Hi everyone,

Followed this thread for a while and found lots of great posts.

Here's my 2 pence worth.

For the past year I have worked my butt off studying the markets, reading books, developing my own systems and eventually finding a strategy which I have back tested over a 4 year period that produces a 74% success rate for a particular market.

Now this might all sound great, but guess what? I'm struggling to breakeven. I've made 25% returns on my account on many days. Predicted the market successfully on many occasions. But I have the habit of being able to lose 25% of my capital within 30 minutes. I've also lost money on days when my analysis was correct as well as on days when my analysis was dead wrong!

This leads on to my point. You could have a great system that has the potential to make you a lot of money, but as Mark Douglas said, (and please forgive me if I have quoted him incorrectly): "The weakest point in any trading system, is the person".

I regard myself as an amateur and I can see first hand what it takes to be a successful trader. And in my opinion, it's very tough work. The discipline aspect of risk management is where I'm getting killed at the moment. But it isn't just that, it's having your emotions in check while you're trading.

Sometimes when I look at the market, it's like Carmen Electra naked in bed whispering to me and asking me to join her. I get excited. Yes, I decide to put 15 contracts on rather than the 4 that would be suitable for my account.

If things go well, then I and Carmen get married. If the position goes against me, Carmen may just well turn into Steve..

Peace..

P.S. No offence intended to anyone. My apologies in advance if that is the case.

 

[temptrader]

firewalker99,

I do not hold the view that intelligence is fixed at birth. Certain "measures" of intelligence maybe, but that's another matter. For example I can conjecture if certain parts of your brain aren't normally formed at birth as the average person there might be an effect seen in later life.

You see, the problem is that we are discussing something that is quite intangible. We are trying to measure something/discuss something that we don't/haven't put on a firm logical foundation/footing to discuss. Hence this will always leads to argument and disagreement.

Now as regards "hard work". Lets loosely say that we were at Newton's time. Could any one of us discover the calculus? If we were living in Euclid's time the answer is NO. The stage has to be set, certain concepts/inventions have to be there before the discovery could be made. This in no way belittles Archimedes'/Euclid's achievements. The hard work done by Newton was to learn all the necessary stuff before him and take it further than anyone ever had/could. That's where the hard work comes in, if he was living in the wrong time then he would waste it all away building ancient machinery. All discoveries in science is of this nature. There are exceptions, like the discovery of penicillin, but mind you, you had to be smart enough to know that something you fell over was amazing.:cheesy: :cheesy: In the same sense I don't feel Crick and Watson are geniuses, but they discovered something important that it revolutionized the way we look at things. Quite a lot of academic careers were made by those who had a "one hit" wonders.

I am not a genetic determinism not in the sense that a lot of people are thinking. Intelligence is a very awkward thing to define, and quite frankly should we even be talking about it in the sense that we are talking about it? The problem with statistics is that they are conceptually difficult to deal with (even for the best of mathematicians - and that's no joke!).

My main objection to what is being discussed here is that we do not have a proper context to lay down what it is that we mean and what it is that we are talking about. Biological systems are extraordinarily complex, and we are using shoddy "rulers" to "measure" things/concepts as a way to simplify our understanding of them. This is fine if you want to kill nasty bacteria, make a new fertilizer that attacks weeds, etc. . . . but falls foul if you want to understand something in its proper context, because the system is too complex. All I can offer, as regards this "genius" debate is what history tells us - and no more, and that's back testing using historical evidence.

 

[temptrader]

Grant,

IMO: It is very dangerous for an aspirant to think that the level of understanding, proficiency, effort, study and practice is proportional to the amount of money they want to make.

Totally agree. One of the hardest things I've ever learnt.

 

[firewalker99]

I do not hold the view that intelligence is fixed at birth.

I'm glad you don't, new_trader on the other hand seems quite fixed on this idea.

Now as regards "hard work". Lets loosely say that we were at Newton's time. Could any one of us discover the calculus? If we were living in Euclid's time the answer is NO. The stage has to be set, certain concepts/inventions have to be there before the discovery could be made.

Which is my point exactly! Perhaps we agree more than we think...

There are external factors that influence a person's abilities, his education, his elders but also his social/political/technological/cultural environment. All those are exactly what I was talking about when I mentioned social determinism.

Biological determinism on the other hand states that the genes define who you are.
I think a person can become much more, but some elements will always be out of his/her control. For example, a child needs parents, he can't choose them.

Some may belief that biology determines our abilities from birth, but free will determines what we do with our abilities. And if a person chooses to work intensively on enhancing his/her skills until he/she reaches mastery, than I see no evidence to suggest that there are limits to what he/she might achieve, giving the fact that starting off young age will greatly enhance the chances of becoming that which he/she ultimately wants to accomplish.

 

[grantx]

NT,

“It is very dangerous for an aspirant to think that the level of understanding, proficiency, effort, study and practice is proportional to the amount of money they want to make.”

Difficult one. Are you saying there is no correlation between depth of knowledge, etc and success? Or success is independent of, or incidental to, all these? Or perhaps, which I would probably favour, the level of understanding perceived to be necessary is grossly underestimated and over-simplified? Or perhaps none of these?

Temptrader,

Re your £2k pw, which you hated. It gets to a point where you think, “Despite the good pay, why am I doing something which makes me miserable?” There’s a member who splits his time between trading and surfing – that’s the way. Leibniz was also instrumental in the development of calculus (simultaneously, but independently I believe).

Re personality traits, lack of common sense /social skills. I don’t think this is the general case but where it is, is probably due to a different perspective on life. Some people measure personal worth (more accurately, how they perceive others regard them) by the car they drive, or the size of their house. Those with an exceptional ability tend to be more concerned with the solving the current scientific dilemma – the material world is not important.

Firewalker,

Re remembering numbers, this reflects my point re the Rainman – means nothing unless it has a broader application. I remember an article on the radio regarding a woman who could add enormous numbers almost instantaneously. Good party trick but of what use is it?

Grant.

 

[temptrader]

grant,

I never got to making 2K a week. I was on a relatively good wage. But I saw where I was going with my career. I could slug it out for another 5 years, BS my way through it, make the people who I work for a lot of money, get more merits on my CV, then become a contractor. The stuff I was learning did not interest me, and the stuff that could interest me required too much dedication that you hardly could do anything else in life.

The thing I hate about being in the work place is that they never really want you to "grow", you always get the raise grudgingly, they only put you on to learn new skills if someone/contract is going to pay for it or if it is essential to the business. You have to be nice to people who you rather not know. And there's the office politics etc, and also not knowing if the person who you work for is putting up a front liking you or not. All that BS and more . . . .

Computers are interesting, but computer programming jobs are generally NOT. All the sexy/red hot stuff requires a lot of work for very little money. That's games programming and they work you to death. Most of the programming jobs that people get paid loads of money for can be done by teenagers - and I kid you not. It's just tedious assimilation of conventions/protocols/logic etc . . . .

And that brings me to my point: Computers are actual simple compared to biological phenomena. We can have debates about their performance characteristics/speed of FPU etc . . . and we can reach consistent conclusions, because everything about them is deterministic. They need to be logically formalized since then when any issues comes up we have a deterministic answer, otherwise they would be of no use to carry out tedious computations, whether it be spitting out a web page, or finding a root of a polynomial using Newton-Ralphson.

Leibniz was also co-discoverer. You also need to know that Fermat had inklings of it too, but his contribution was over shadowed. It was Descartes invention of cartesian co- ordinates that set the stage for the discovery of the calculus. All three men learnt about the Cartesian system to get to the calculus. A lot of people think that Leibniz was more influential since he popularize it, unlike Newton who jealously guarded his secrets and had priority disputes all the time.

 

[grantx]

Temptrader,

Forgot about Descartes. Newton got a lot of sthi from Bishop Berkeley. Newton’s notion that the earth was not the centre of the universe – undermining biblical precepts – upset Berkeley; I’m 60% certain his calculus had similar connotations. David Hume, of Black Swan fame, was an apologist for Berkeley. Which leads us to that contemporary derivatives 'expert'

Grant.

 

[firewalker99]

Firewalker,

Re remembering numbers, this reflects my point re the Rainman – means nothing unless it has a broader application. I remember an article on the radio regarding a woman who could add enormous numbers almost instantaneously. Good party trick but of what use is it?

Grant.

I was just giving an illustration of something simple which can be trained to such an extent that most people would think is unattainable. There are certainly practical applications to be considered. I'm thinking of military or espionage purposes where people with an extraordinary photographic memory will be used to gain information about the other party. There's nothing new about that. I agree that most of these "abilities" will remain a good party trick, but what if people intensively trained other functions?

Btw, news of the day:
Chimps beat humans in memory test

 

[new_trader]

I'm glad you don't, new_trader on the other hand seems quite fixed on this idea.

firewalker,

I think you misunderstand what I am saying. As far as I know you cannot increase the number of brain cells by studying, learning or any other mental activity.

- Nuerons are electrically excitable cells in the nervous system that process and transmit information.

-Neurons are the core components of the brain, spinal cord and peripheral nerves.

-Neurons communicate with one another via synapses

-The number of neurons in the brain varies dramatically from species to species.

-One estimate puts the human brain at about 100 billion (1011) neurons and 100 trillion (1014) synapses.

-It has been estimated that the brain of a three-year-old child has about 1016 synapses (10 quadrillion). This number declines with age, stabilizing by adulthood.

-Estimates vary for an adult, ranging from 1015 to 5 x 1015 synapses (1 to 5 quadrillion)


Can you point me to an article which provides evidence to suggest that these biological limitations can be changed?

Do you think the weight of an adult brain increases to accomodate new knowledge or cognitive functions? Where do these extra brain cells come from?

Would the cranium eventually explode from the expanding brain if someone learns too much?

 

[tune]

Would the cranium eventually explode from the expanding brain if someone learns too much?

I saw it happen to an old chap in the library once. There was wisdom all over the place.

 

[firewalker99]

firewalker,

I think you misunderstand what I am saying. As far as I know you cannot increase the number of brain cells by studying, learning or any other mental activity.

Do you think the weight of an adult brain increases to accomodate new knowledge or cognitive functions? Where do these extra brain cells come from?

Would the cranium eventually explode from the expanding brain if someone learns too much?

Firstly, since when does learning or acquire a certain skill requires one to increase the number of brain cells? As far as I know (but I'll look into the matter) I've always read that by studying, working, learning, the neural processing speed can be altered, which is what makes the brain better and faster at processing complex connections. But - I admit it - I don't know the exact physiological process that go on in the brain. What I do however, is that intelligence is not fixed at birth and neither is the number of brain cells/neurons.

I just googled and the first article I came up with this:

"...For decades, neuroscientists believed the number of new cells, or neurons, in the adult brain was fixed early in life. Adaptive processes such as learning, memory and mood were thought tied to changes in synapses, connections between neurons.

More recently, studies have shown that the adult human brain is capable of producing new brain cells throughout life, a neurogenesis resulting in formation of hundreds of thousands of new neurons each month..."

Looks like whatever your comments are based on, is outdated research. When I have some more time, I'll try and dig up some scientific papers.

There's plenty of information available that contradicts what you are saying:

"It was once thought that the brain stopped producing new brain cells early in its development and that brainpower dimmed as cells died over the years. But in the past decade, researchers have found evidence that the brain continues to generate new brain cells throughout life, even in humans. Studies indicated that challenging environments, which included a number of components, such as pumped-up learning opportunities, social interactions and physical activities, were key to boosting the growth."

 

[mr_cassandra]

Hi everyone,

Followed this thread for a while and found lots of great posts.

Here's my 2 pence worth.

For the past year I have worked my butt off studying the markets, reading books, developing my own systems and eventually finding a strategy which I have back tested over a 4 year period that produces a 74% success rate for a particular market.

Now this might all sound great, but guess what? I'm struggling to breakeven. I've made 25% returns on my account on many days. Predicted the market successfully on many occasions. But I have the habit of being able to lose 25% of my capital within 30 minutes. I've also lost money on days when my analysis was correct as well as on days when my analysis was dead wrong!

This leads on to my point. You could have a great system that has the potential to make you a lot of money, but as Mark Douglas said, (and please forgive me if I have quoted him incorrectly): "The weakest point in any trading system, is the person".

I regard myself as an amateur and I can see first hand what it takes to be a successful trader. And in my opinion, it's very tough work. The discipline aspect of risk management is where I'm getting killed at the moment. But it isn't just that, it's having your emotions in check while you're trading.

Sometimes when I look at the market, it's like Carmen Electra naked in bed whispering to me and asking me to join her. I get excited. Yes, I decide to put 15 contracts on rather than the 4 that would be suitable for my account.

If things go well, then I and Carmen get married. If the position goes against me, Carmen may just well turn into Steve..

Peace..

P.S. No offence intended to anyone. My apologies in advance if that is the case.

You have hit a major point. In my own case my 'gut' feelings were the worst factor in my trading. After I took a huge beating at the start of the recent historic nasdaq bear mkt in 2000, I deicided to use my abilities as a programmer and began writing a program to trade with that would cut 'me' out of the decision loop.