Intuitive contrasted with Analytical, or Technicals contrasted with Fundamentals.

[ducati998]

INTUITION,

Defined as, a non-conscious process of problem solving through pattern recognition and higher order reasoning, developed over time, through, tacit learning and experience, and expressed through both insight and feeling.

ANALYTICAL
Defined as, a direct conscious effort of problem solving through distinct steps, based on rational, logical, quantitative economic models.

VARIABLES,
To include, expertise (yet to be defined) context (yet to be defined) cognitive function(YTBD) emotional awareness(YTBD) emotional manipulation(YTBD) Qualitative models(YTBD)

Have a think about some definitions for any of the above, and if interested, post them.
cheers d998

 

[RUDEBOY]

Expertise, well, the dictionary quotes noun: Skillfulness by virtue of possessing special knowledge.

 

[RUDEBOY]

Virtue-noun: The quality of doing what is right and avoiding what is wrong.

 

[RUDEBOY]

Knowledge-noun: Familiarity, awareness or understandig gained through exprience or study.

 

[RUDEBOY]

Ducati, this is probably not what you are after, but i thought i'd throw it in just for starters.

 

[RUDEBOY]

Prudent 'Expert' Act, reqired by ERISA, it states " The main addition is that the manager must act as someone with familiarity with matters relating to the management of money, not just prudence. " Any thoughts?

 

[Glenn]

Fundamentals
How big your house is, where it is, how well appointed it is.

Technicals
What people are currently willing to pay for it (the Price), which will vary tremendously despite there being no change whatever in the fundamentals. The simple reason being how many houses are available and how many people are wanting and can afford to buy houses at any particular time - which has hardly anything to do with the houses themselves.

Not sure what any of this has got to do with Trading Psychology though.
Glenn

 

[RUDEBOY]

Time produces it is never produced it is a constant and not a variable, it is crucial to understand time as a market force, indeed, the market force.

 

[RUDEBOY]

Ducati, sorry for gettin' off the original thread, but i've got to stress that time encapsulates P&V, also, that price dictates volume not the other way round. Sorry just had to say it. Anyway...

 

[ducati998]

All,
The general idea is to form a psychological profile that would indicate a trading approach that matches as closely as possible this profile.

That is to say, while I advocate fundamentals, I do so purely from a personal comfort zone, and this has to be accepted as appropriate for myself, but totally inappropriate for someone else, who would profit and benefit from a mechanical system.

However, I suspect, that many traders start out utilising a trading methodology that is totally opposed to their personal psychology, and struggle along until they either blow out, or change.

The choice of forum can have a huge impact on this process, as there is generally, but not always a bias to one style over many others.

You may answer by saying, well everyone is free to choose, and that is true, but, most people are very ignorant of their own psychological makeup, learning process, biases, etc.

The "education" thread, and a conversation I had with "RUDE" yesterday suggested that the lack of formal education for traders and the # of charlatans offering education at inflationary price levels .........a gap in the market.

cheers d998

 

[ducati998]

To start the ball rolling,

INFORMATION.

1....The volume of information available. Sorting the wheat from the chaff. What information has market sensitivity, what is gossip, conjecture, noise, macro, as opposed to micro (stock specific)

2....Type of information........similar to above but subtle differences,....Quantitative information, Qualitative information...(The difference is that this information has been filtered and is relevant and important)

3....Presentation (Sources) of information,........News releases, Analyst reports, Financial publications, Financial statements, CNBC etc, Bloomberg etc, Tips, Insider, Market newsletters, Charts, Price,Volume, Indicators,(Visual)

4.....Analysing the information........what is your psychological makeup? How do you think? are you analytical, intuitive, emotional calm, highly strung, quick or slow, risk seeking, risk averse?

5....How did you initially learn your current methodology?.......Books, self taught, mentor, private course, public forum, securities analyst qualification, on the floor, imitation,still trying to learn, hard experience, losing all, or nearly all,.............................?

6......Do you feel that you chose correctly the first time? If yes, why? If no why not?

cheers d998

 

[ducati998]

Can you really make better decisions with more information? Perhaps artificial intelligence has the answer. Find out how you can develop skills to gain control.

There are content-drenched websites such as TheStreet.com, CNBC.com, cbsmarketwatch. com, and so many more. Add to these all the subscription-based investing magazines and newsletters that are available. Can there be any doubt about our thirst for information? We tend to assume that people can make better decisions with more information. The logical extension is that people will make even better decisions with even more information. But is that true?

Do people really make better choices with more information, or can too much information actually undermine the decision-making process?

Among economists, it is an axiom that choice is good and more choice is better. Giving buyers more choice means more -- and more intense -- competition, which lowers prices, raises quality and fosters innovation. In the end, workers are more productive, consumers are better off and the economy is bigger and more efficient. It's a lovely theory. ... Unfortunately, it turns out not to be true. Yes, up to a point, choice does enhance efficiency and consumer welfare. But at some point, there get to be so many options about what to buy or what career to go into or which mutual fund to invest in that many people make worse decisions than they would if they had fewer choices...

We can only process a finite amount of information at any time. Once exceeded, information overload occurs. Studies have shown that as a decision-maker is initially given information, decision quality improves, but once the information level reaches saturation point, the decision-making quality begins to deteriorate. Thus, at some point, we become overloaded with information, and our decision-making abilities erode.

Just pinched this from previous thread.
In essence, this has to do with the "VOLUME" of information.

Individuals will have different saturation points. Lets examine this from the 2 extreme viewpoints............

1.....Can you effectively trade (profitably) with ZERO information?
2.....Can you effectively trade with ALL the information?

cheers d998

 

[Glenn]

Re: 1. 2. and 3.
It is mistaken to believe that deeper and deeper analysis of markets will bring a greater understanding and therefore some benefit (profit etc). Well educated people in particular are inclined to think this way.

There is no need whatever to understand much at all. And yet people persist in gathering immense amounts of useless info, debating it and it's effects ad nauseam.

The only people who benefit are the purveyors of the information which is so frantically sought and therefore in many cases paid for by those believing that it will give them the edge they need.

imho.
Glenn

 

[wisestguy]

>>You may answer by saying, well everyone is free to choose, and that is true, but, most people are very >>ignorant of their own psychological makeup, learning process, biases, etc.

true , and it extends to the general question as to if the person shuld be trading at all , as trading for the wrong reasons means that one shuld be doing something else to satisfy that " urge ".

yes , it comes back to that old chesnut again : gambling , some people love to gamble and that's fine but they mistake their activity in the market as a real desire to trade , whereas it is nothing more than an urge to punt.

the other issue is , that some methods do not suit some instruments and vice versa.

therefore , you can't use fundamentals on indecies , can you ? you cannot practically apply fund.analysis on 30 stocks . thus it is much much more prudent to use TA in this case.

conversely , with stocks , you could use TA exclusively but that would be foolish .

 

[Glenn]

conversely , with stocks , you could use TA exclusively but that would be foolish .

Have to disagree on that point having traded and invested successfully in stocks for years using only TA.
Everything else is just a distraction.
Glenn

 

[ducati998]

Glen,

It is mistaken to believe that deeper and deeper analysis of markets will bring a greater understanding and therefore some benefit (profit etc). Well educated people in particular are inclined to think this way.

My opinion is that it depends. It would depend upon the individual, it would depend on the line of thought or reasoning he explored, it would depend on the information he was able to access, and many other variables.

However as regards trading or investing with zero information, paradoxically, this would in aggregate work out reasonably well, assuming a fixed $$ value of an ETF, say SPY, bought every month. Time, would be one important factor, the other being no pressing need for the money.

Trading with all the information, would be I suspect an impossibility, due to the endless spew of data produced daily in the markets.

This brings us to the division that exists currently, three, possibly four seperate methodologies, .....Technicals, Fundamentals, Systems, Quants.
These methodologies emphasise a particular quality of information for analysis.

However, before examining this,.......why with no effort, analysis requirement, or thought required to be profitable, ............why would you bother?

The obvious answer, as we believe we can via information, (as yet an undetermined volume) crunched via an analysis technique, surpass the index return.
It is interesting to note, all the greats, Buffett, Tudor-Jones, anyone, always compares themselves against the benchmark.............the index return.

Take any trading statistics,.........failure..........what is in our psyche that makes us believe, using a variable amount of information, that we can outperform, where so few succeed?

Wise,

true , and it extends to the general question as to if the person shuld be trading at all , as trading for the wrong reasons means that one shuld be doing something else to satisfy that " urge ".

The URGE............
Definitely to do with the urge. But what exactly is the urge?

Glen,

Have to disagree on that point having traded and invested successfully in stocks for years using only TA.

Everything else is just a distraction.

Only TA, and successfully. Therefore, something within you allows you to succeed where many fail, based on visual information, I assume visual analysis, and visual or written plan?

Everything else a distraction...........seriously, what is the everything else?
What stays for analysis, what is discarded?

cheers d998

 

[Glenn]

"What stays for analysis, .."

1. Naked ohlc bar charts. No indicators whatever.
2. Occasional reference to volume.
3. The bid/offer price quotes from my broker.

"what is discarded?"
Everything else is 'discarded'.

"something within you allows you to succeed where many fail"
Only the fact that I accept (know from experience) that the above is all that is required.
I am well educated and can promise you that none of it is of any benefit in this game.
However this leaves nothing to discuss in the pub or on a bulletin board about trading because there is so little to it. You can't compare carburettors or superchargers or tyres or diesel vs petrol or Jag vs Aston Martin and gain anything worthwhile from it - it's just pub-talk.
Well educated people often assume that they have to intellectualise and use their superior brain power in connection with something as high-flown as the markets. But the markets are one place where this doesn't work.
You have to think differently.
Glenn

 

[RUDEBOY]

i tend to agree with Glen, some good points made there. Personally, i only bother with PVT, not that to use other forms of analysis also is wrong, to be honest i get the desired result so why try and fix something that works, i like the simple approach!

 

[RUDEBOY]

I also agree with glen, in that, if you have simple 'set up', then there isn't that much to talk about concerning the markets, it's all just opinion?

 

[RUDEBOY]

I'm using the word simple to much...mmm?