How important is it to be creative in your trading?

[Joe Ross]

I’m not sure I can describe it in terms of importance. The creative process is somewhat of a mystery, even to scientists who study it. There are a few common characteristics that all creative persons possess (such as an openness to a variety of internal and external experiences and a driving need to express one's sense of individualism), but for the most part, exactly how the creative mind makes earthshaking discoveries is unknown. A few prerequisites are necessary, though. The mind must be focused, for example. New ideas must flow through the mind freely, and there must be a wide range of ideas, so that they can be combined and re-combined in new ways. New and creative trading ideas are necessary to stay ahead of the crowd, so doing whatever you can to prepare your mind to brainstorm new ideas will help you develop creative trading strategies that are the foundation of profitable trading.

Many great scientific discoveries were made almost by accident, through a serendipitous observation. Had an untrained eye made the observation, it would have been missed. But because the scientist's mind was continuously running through a wealth of ideas, he or she saw a new discovery in a seemingly ordinary event. Discovering new trading ideas is also a creative, intellectual endeavor. You must get your creative juices flowing in order to see the next new idea. It's essential that you "prime" your thinking processes, get your mind ready to make a creative observation.

In some ways, your mind is like a well. You prime a well to get the water flowing, and once it's started, it flows continuously. You must similarly prime your mind to get ideas flowing. Various ideas in your mind are stored in a hierarchical structure. Information is stored together in a clump, depending on its meaning. When you aren't thinking of a particular topic, it's hard to bring information about that topic into consciousness; it lies their stagnant and hidden. However, when you make a concerted effort to think carefully about a specific topic, or a closely related topic, and start running through a bunch of possibilities, all kinds of new possibilities become apparent. Your mind quickly scans various concepts and ideas, almost unconsciously. Suddenly this wealth of information combines and you see something new. For example, suppose you develop a vague trading idea about how a set of indicators may forecast the price of a particular stock. Once you get the basic idea in your mind, you can prime your mind to get the creative juices flowing. For example, you can scan a set of charts to backtest and find support for your hypothesis. As you look through the charts, the information you see will prime other related information. Soon idea after idea will coalesce, and you'll make a new discovery that will serve as a basis for a new trading strategy. The main point is that you must set your thinking processes in motion to come up with a creative new idea. Some traders even suggest putting on a small trade based on a hunch in order to set your creative processes in motion. When you put on a trade, your adrenalin starts to rush, your attention starts to focus, your senses are heightened, and you suddenly change your perspective until you see new ideas. The more your mind is active, the more likely you'll make creative new discoveries. Knowing about the creative process and how to set it in motion gives you power. Some people are down on themselves because they can't seem to think creatively. But they can. They just need to know how to do it. It's vital to be relaxed and free of anxiety. But it's also essential to prime your mind in order to start the process. So when it's time to think of a new trading idea, think creatively. Set your creative processes in motion. You may come up with a big idea that will make you huge profits.

The creative process is somewhat of a mystery, even to scientists who study it. There are a few common characteristics that all creative persons possess (such as an openness to a variety of internal and external experiences and a driving need to express one's sense of individualism), but for the most part, exactly how the creative mind makes earthshaking discoveries is unknown. A few prerequisites are necessary, though. The mind must be focused, for example. New ideas must flow through the mind freely, and there must be a wide range of ideas, so that they can be combined and re-combined in new ways. New and creative trading ideas are necessary to stay ahead of the crowd, so doing whatever you can to prepare your mind to brainstorm new ideas will help you develop creative trading strategies that are the foundation of profitable trading.

 

[Trader333]

Any reason why you have duplicated much of your post twice ?


Paul

 

[sandpiper]

Any reason why you have duplicated much of your post twice ?


Paul

Paul, technically I think he's duplicated it once .

 

[Trader333]

Technically, you are correct and it is a grammatical error on my part


paul

 

[sandpiper]

Technically, you are correct and it is a grammatical error on my part


paul

Paul,

And that's about all there is to say about it really. It is a pity because I actually like Joe's early stuff. I still think that the original "Trading by the Minute" and "Trading the Ross Hook" were seminal works and I would never get rid of mine. This stuff just keeps getting worse though.

Sorry Joe. I know you've come in for some stick recently and I've been desperately looking for some reason to come out in support, but this stuff really doesn't say anything. The aforementioned works were everything that this stuff is not, i.e. objective, well reasoned, well researched, matter of fact and explicit.

If you are going to post teaser type material on here why not make it on spread trading or the like (I know that to be an area of your work that people rate highly) instead of this "fluffy" rubbish that does your reputation no good at all.

Cheers.

 

[Joe Ross]

I didn't realize I had. Looks like a goof-up. I'm not really very computer literate. For instance I still don't know how to get a chart into a forum post

 

[counter_violent]

I didn't realize I had. Looks like a goof-up. I'm not really very computer literate. For instance I still don't know how to get a chart into a forum post

Let me fix that for you

If you wish to add a chart...scroll down beyond your post , you will see a button that says " manage attchments" click that and navigate a pic from your collection on your PC .

cheers cv

 

[tradetheprofile]

Hey Joe, it's great to have your input. I totally agree with your perspective regarding the creative process. After all, it is that exact process that has given us many of the decision support tools that traders use every day. In my case, the same creative process has allowed me to identify profitable price patterns and to develop a number of indicators that I use in my trading every day.

I don't think your words are "fluffy rubbish", although, I believe it could be difficult for a person to understand your perspective if they are not naturally creative themselves. Creativity is not something we are all blessed with from birth, but it is something we can develop.

I remember this quote from Eric Hoffer, which I believe extols the virtue of keeping ahead of the game: "In times of change the learners will inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists".

The creative process is one way to keep up with the markets, but if you sit back and believe that the trading method you learned today will keep working successfully in the future, you had better think twice. Personally, I ere on the safe side and continually look for, or develop, new ways to adapt to the changing dynamics of financial markets.

 

[Trader333]

if you sit back and believe that the trading method you learned today will keep working successfully in the future, you had better think twice

Why ?


Paul

 

[tradetheprofile]

Why ?


Paul

Quite simply because, in spite of the random nature of financial markets, they are efficient. If a person believes they have a holy grail of trading methods, you can be sure that the rest of the world is looking to improve on theirs. That process of improvement alters the market dynamic that lead to the discovery of [your] method and, ultimately, makes it redundant.

Providing we work at improving/adapting our methodology and don't become complaisant, we stand a much better chance of being profitable moving forward. Well, that's what I believe, anyway.

 

[Technically Fundamental]

Didn't an unwavering belief in efficient market hypothesis lead to several hedge funds closing up shop

 

[gooseman]

you're thinking LTCM et al but you're right and you're not. can't be bovvered to speel an essay as it's busy but basically the thinking is if you think you ahve something great, someone will copy it, put it to use and squeeze margins. not strictly efficient market hypothesis.

 

[Trader333]

That process of improvement alters the market dynamic that lead to the discovery of [your] method and, ultimately, makes it redundant.

I see no evidence that there is an ongoing process of improvement in trading and even less that a method that has worked in the past fails to do so now. There may be some new techniques that have come about from changes in trading such as electronic exchanges and this will have some impact on day-trading but for those who position trade or trade over a longer time horizon I see nothing has changed at all.

If it has please say in what way as I have obviously missed it ?


Paul

 

[tradetheprofile]

I see no evidence that there is an ongoing process of improvement in trading and even less that a method that has worked in the past fails to do so now. There may be some new techniques that have come about from changes in trading such as electronic exchanges and this will have some impact on day-trading but for those who position trade or trade over a longer time horizon I see nothing has changed at all.

If it has please say in what way as I have obviously missed it ?


Paul

Sorry Paul, I don't really want to get into a protracted debate because firstly, I'm sure everyone has a view on this, and secondly, the debate would move away from the theme of Joe's initial posting.

All I am trying to say is, that to be [consistently] profitable trading the markets, regardless of the time compression we trade, it is important that we find an edge. That edge, which has a limited shelf life due to market efficiency, is usually the product of a creative process. That's it!

Enjoy your trading, and I hope everyone is consistently profitable.

 

[charliechan]

I'm not really very computer literate.

thats what i told my broker. he was having none of it

 

[Dawso]

I'm with joe on this one

 

[snake86]

Sorry Paul, I don't really want to get into a protracted debate because firstly, I'm sure everyone has a view on this, and secondly, the debate would move away from the theme of Joe's initial posting.

All I am trying to say is, that to be [consistently] profitable trading the markets, regardless of the time compression we trade, it is important that we find an edge. That edge, which has a limited shelf life due to market efficiency, is usually the product of a creative process. That's it!

Enjoy your trading, and I hope everyone is consistently profitable.

tradetheprofile,

Forgive me for being blunt mate, but the markets are anything but efficient, not even close. Secondly you can't make that statement without defining efficiency. Sure, if you mean that they hand out judgement quickly but not otherwise.

 

[zigglewigler]

If the markets were efficient there would be little to no opportunity for profit.

The market, at any one time being the true and accurate summation of all known information, but along comes something, another variable that will move the market.

You can't make money predicting it, you can't know the variable beforehand, prediction is for fantasists, but you can make money by reacting to it.

It's like a baseball throwing machine. You only know that the ball will come towards you, (you know the market will be open and that there will be some activity), but you will not know exactly where and when. The better you react, the better your hit rate.

Prediction and reaction look the same, but aren't.

As regards the long term viability of trading systems or methodologies, things may get tighter and faster, but the fundamentals of trading remain, the herd don't know diddly- squat. Your edge, and it has to be a personal one, once discovered, tested and proven, will remain valid.

I think the oft quoted refrain that the market will discover your edge and invalidate it, helps traders fiddle their systems rather than tackle the real inefficient aspect of the markets, man's psychology.

As for the creative process, it's a tap, turn it on, out comes the cloudy dirty water, followed by a spurt of pure. You can't turn it on and immediately get just want you want.

You start the process and start filtering. But you have to spend the hours often fruitlessly, but as long as you stick with it, especially in trading, armed with a huge capacity to handle boredom, those moments of inspiration come along.

 

[white4burgundy]

True. There should be a better way to keep your trade going. The presence of mind, focus, and the will should be there. Everybody must be having those factors, but your handwork, will still make the difference. Thus, above the mindsets of traders, the handwork will still push it through.

 

[Frank563]

If the markets were efficient there would be little to no opportunity for profit.

The market, at any one time being the true and accurate summation of all known information, but along comes something, another variable that will move the market.

You can't make money predicting it, you can't know the variable beforehand, prediction is for fantasists, but you can make money by reacting to it.

It's like a baseball throwing machine. You only know that the ball will come towards you, (you know the market will be open and that there will be some activity), but you will not know exactly where and when. The better you react, the better your hit rate.

Prediction and reaction look the same, but aren't.

As regards the long term viability of trading systems or methodologies, things may get tighter and faster, but the fundamentals of trading remain, the herd don't know diddly- squat. Your edge, and it has to be a personal one, once discovered, tested and proven, will remain valid.

I think the oft quoted refrain that the market will discover your edge and invalidate it, helps traders fiddle their systems rather than tackle the real inefficient aspect of the markets, man's psychology.

As for the creative process, it's a tap, turn it on, out comes the cloudy dirty water, followed by a spurt of pure. You can't turn it on and immediately get just want you want.

You start the process and start filtering. But you have to spend the hours often fruitlessly, but as long as you stick with it, especially in trading, armed with a huge capacity to handle boredom, those moments of inspiration come along.

A good post for newbies to read. When you stop predicting and apply a proven method of reacting your win rate will increase substantially. Reacting, for me, is safer trading in that I do give up some of the move but when I do trade it is with the move.

It was in this forum that I read that a new trader should look to invest 3000 hours before he invests a ton of money because it may just take that time much to figure out what does the job for you. :idea: