Trading Careers Life as a Trader

Brumby · Feb 17, 2018

There are two main reasons why I have badly rated this article.

Firstly i think the author is making an important point either simply out of ignorance or not fully comprehending contradictory statements are being made. I am referring to the following statements in the article "
"the most important insight was that emotion is directly linked to your gut instinct far more than logic and that it’s nearly impossible to separate emotion from our thinking patterns and decision making." and "The same applies in trading, we as traders simply don’t always have all the information to hand and often must make gut based decisions. Of course, that doesn’t mean that we always make the correct ones, but I can tell from experience that 95% of the time my gut has been correct.

The first statement seems to suggest that emotions and instinct are closely linked and in the second statement that he often uses instinct in trading and is largely 95 % correct. The statements collectively suggest in my view is that the trader is at least promoting in his case instinct or by inference emotions in trading works for him. Secondly if instinct works for him it is useless to me because that knowledge is non transferrable. What exactly is gut instinct?

AdrianGA · Feb 17, 2018

Hi Brumby,

Thank you for your feedback.

I would like to clarify what I meant by emotions and "gut" instinct.

A few years ago I read a fascinating book by Malcolm Gladwell called "Blink: The Power of Thinking Without Thinking" which delves into split second decision making by means of a process called "thin slicing." Thin slicing is our ability to use limited information from a very narrow period of experience to draw a conclusion. Among other things, the idea also suggests that snap decisions often are as good, if not better than carefully considered ones. Of course, this doesn't imply that you should not make carefully considered plans because that would be a stupid suggestion. What he is trying to say is that there are often times when too much information can interfere with your accuracy of judgment.

I can delve into this topic forever, but to cut a long story short, his research into experts within their respective fields did also lead him to conclude that this ability, although present in all of us, becomes more useful and accurate as you gain more experience in your respective field, and that using it as a complete and utter novice might very well lead to horrible decisions being made.

To answer your second question, you're right it is not a transferable skill from myself to anyone else and thus you may deem it useless from that point of view. The problem with your argument is that I never suggested transferring any skill from myself to any of the readers. I was merely expressing from my own personal perspective that after years of doing this and having made countless mistakes, the opportunities I missed and took when I used my "gut instinct" were or would have been correct 95% of the time. The entire point of this article was to raise awareness of the ability that we all have within ourselves and to cultivate it instead of merely dismissing it as hogwash the way so many people do.

Either way, I'm glad that you gave your feedback and look forward to reading some of your articles for us to review.

Brumby · Feb 17, 2018

AdrianGA said:
A few years ago I read a fascinating book by Malcolm Gladwell called "Blink: The Power of Thinking Without Thinking" which delves into split second decision making by means of a process called "thin slicing." Thin slicing is our ability to use limited information from a very narrow period of experience to draw a conclusion. Among other things, the idea also suggests that snap decisions often are as good, if not better than carefully considered ones. Of course, this doesn't imply that you should not make carefully considered plans because that would be a stupid suggestion. What he is trying to say is that there are often times when too much information can interfere with your accuracy of judgment.

I can delve into this topic forever, but to cut a long story short, his research into experts within their respective fields did also lead him to conclude that this ability, although present in all of us, becomes more useful and accurate as you gain more experience in your respective field, and that using it as a complete and utter novice might very well lead to horrible decisions being made.

Your view concerning cognitive shortcuts is true in general situations but falls apart in situations involving risk and uncertainty as in trading. There is a body of research that supports such a conclusion. Nobel laureate Daniel Kahneman and Amos Tversky in their research found that when people make decisions under conditions of risk and uncertainty, they have a strong tendency to abandon careful rational analysis and, instead, apply heuristics and other cognitive short cuts. This often produces predictable errors and poor outcomes. This ground breaking research lead to a new discipline known as behavioral finance. The pervasive nature of our minds to almost automatically default to an error‐prone mental shortcut was further considered by a cognitive psychologist Shane Frederick who studies heuristics and biases (Shane Frederick, “Cognitive Reflection and Decision Making,” Journal of Economic Perspectives 19 (2005): 27.). In the research labs, cognitive psychologists Maggie Toplak, Richard West, and Keith Stanovich have shown that answers to Frederick’s test are correlated with susceptibility to commit cognitive biases and errors. Their research indicate that a preference for using heuristics is likely to produce judgment errors when in situations involving uncertainty such as trading. Psychologists such as Daniel Kahneman who study cognition conceptualize our minds as having two parts or thinking systems. Kahneman calls these minds System 1 and System 2 also known as intuitive mind and deliberative mind. Our intuitive minds are very quick in making judgments but in trading with its risk and uncertainty can easily be a mental blind spot.

AdrianGA said:
To answer your second question, you're right it is not a transferable skill from myself to anyone else and thus you may deem it useless from that point of view. The problem with your argument is that I never suggested transferring any skill from myself to any of the readers. I was merely expressing from my own personal perspective that after years of doing this and having made countless mistakes, the opportunities I missed and took when I used my "gut instinct" were or would have been correct 95% of the time. The entire point of this article was to raise awareness of the ability that we all have within ourselves and to cultivate it instead of merely dismissing it as hogwash the way so many people do.

In my view, a trading article such as yours to have any utility should meet a basic threshold of not just informing but in at least providing an understanding for others what "gut instinct" means and more importantly how one may get there as you have. If not than such an idea has no value to others and that was my point. i would encourage if you can expand on that subject matter maybe in a follow up article so that it can become something of value to our readers. My apolgies if my original point was not phrased appropriately.

mpups · Feb 17, 2018

Brumby said:
...cognitive psychologists Maggie Toplak, Richard West, and Keith Stanovich have shown that answers to Frederick’s test are correlated with susceptibility to commit cognitive biases and errors. Their research indicate that a preference for using heuristics is likely to produce judgment errors when in situations involving uncertainty such as trading. Psychologists such as Daniel Kahneman who study cognition conceptualize our minds as having two parts or thinking systems. Kahneman calls these minds System 1 and System 2 also known as intuitive mind and deliberative mind. Our intuitive minds are very quick in making judgments but in trading with its risk and uncertainty can easily be a mental blind spot...

this is a very interesting perspective into the psychological difficulties of trading, thanks for sharing brumby

AdrianGA · Feb 17, 2018

Brumby said:
Your view concerning cognitive shortcuts is true in general situations but falls apart in situations involving risk and uncertainty as in trading.

In my view, a trading article such as yours to have any utility should meet a basic threshold of not just informing but in at least providing an understanding for others what "gut instinct" means and more importantly how one may get there as you have. If not than such an idea has no value to others and that was my point. i would encourage if you can expand on that subject matter maybe in a follow up article so that it can become something of value to our readers. My apolgies if my original point was not phrased appropriately.

Hi Brumby,

Respectfully, I'm going to profusely disagree with you on that point, because there are multiple situations on a daily basis in which people simply have to make very accurate snap judgments in literal life-or-death situations. Our entire society would collapse if we didn't have the ability to do so.

While their research is correct to point out that that "most" people would fall apart in particular situations, due to what I would assume to be a lack of experience, ability or mental/emotional strength or a multitude of complex factors that weren't mentioned, it would be completely unfair and inaccurate to suggest that it applies to all people in all risky and uncertain situations.

It's common sense that trading has powerful elements of risk and uncertainty and obviously it can effect your livelihood based on how well or poorly you perform. Of course trading is very difficult and psychologically taxing, it goes without saying that ALL of us form our own cognitive biases and make completely wrong decisions on a daily basis, it's part of the human condition. Heck, if it was so easy then we would all be multi-billionaires by now. But to even suggest that the profession is somehow excluded from successful accurate snap judgments just because of the research you showed me would be inaccurate.

If what you said there is true then there would be no way in hell that paramedics, soldiers, policemen, firemen, air traffic controllers, astronauts, professional fighters etc. would be able to perform under pressure, and quite frankly....and with all due respects, it would be insulting to those people to even suggest that traders face riskier and more uncertainty than what they do. We risk losing money when we're wrong....their decisions risk losing lives.

If you refer back to what I said, you'll notice that I mentioned the accuracy of snap judgments depends on how experienced and comfortable you are in your respective field. And as I stated, it is something you learn through experience.

I've seen people who are far better at this than I am who have this uncanny ability to make very accurate snap judgments most of the time. Why? Because of unconscious competence...and how do you achieve that? Repetition. Anyone with a little bit of common sense knows that.

I really am trying to see what you're getting across, yet I also realise that you don't like my article which is fine by me because you are fully entitled to your thoughts and opinions.

And while I appreciate and enjoy this debate with you, I also think it's fair to assume that the readers aren't simpletons, but instead are most likely highly intelligent and more than capable of not only understanding, but also probably able to relate to that piece of common sense I presented in some way or form even if they don't actively use it as part of their trading per say.

Had I passed on a life-altering piece of wisdom that nobody had heard of then I would wholeheartedly agree with you that I needed to go into a much deeper explanation of what I meant. But since it isn't the case and merely serves a "reminder" or "suggestion" of another aspect of their inner edge that can be worked on and developed (myself included as this is after all a never-ending process), I didn't' see the need at the time of writing the article to break down such a simple concept. And if anyone feels that I didn't express myself in a correct manner then I apologise for that.

So, just for the sake of this argument, I'll alter my statement to "but I can tell from my personal experience that in hindsight, 95% of my gut based decisions that (I made or neglected to make at the time) would have been correct."

Brumby · Feb 19, 2018

AdrianGA said:
Respectfully, I'm going to profusely disagree with you on that point, because there are multiple situations on a daily basis in which people simply have to make very accurate snap judgments in literal life-or-death situations. Our entire society would collapse if we didn't have the ability to do so.

I am simply pointing out that studies in decision making under conditions of risk and uncertainty suggest we tend to default to the intuitive path which unfortunately is sub optimal in terms of decision making. This is far off from the notion that somehow society would collapse because decision making is incapacitated. I would also point out that research conducted by Professor Richard Blonna (William Paterson University) an expert in stress and anxiety explains, there are universal actions that the brain and body perform when our stress response is triggered. It is the way we are genetically programmed. The body automatically redistribute oxygen, breathing becomes rapid to oxygenate the blood stream, skin pore is open, our digestive system shuts down as energy is re-directed, salivation stops. Mentally our focus becomes narrowed as our attention is directed to the perceived threat. Our ability to make sound and considered judgement becomes impaired. It is at this point that as traders we tend to make sub optimal or at worst irrational decisions.

AdrianGA said:
While their research is correct to point out that that "most" people would fall apart in particular situations, due to what I would assume to be a lack of experience, ability or mental/emotional strength or a multitude of complex factors that weren't mentioned, it would be completely unfair and inaccurate to suggest that it applies to all people in all risky and uncertain situations.

A cross spectrum of the population will obviously vary in term of “degrees’ when faced with identical situations. The point is not about picking on any individual or about fairness but central in it is an informed discussion about the issue based on facts and not opinion.

AdrianGA said:
It's common sense that trading has powerful elements of risk and uncertainty and obviously it can effect your livelihood based on how well or poorly you perform. Of course trading is very difficult and psychologically taxing, it goes without saying that ALL of us form our own cognitive biases and make completely wrong decisions on a daily basis, it's part of the human condition. Heck, if it was so easy then we would all be multi-billionaires by now. But to even suggest that the profession is somehow excluded from successful accurate snap judgments just because of the research you showed me would be inaccurate.

No where in my discussions are there suggestions that because of the conditions described that somehow accurate snap judgements are not possible. The point is simply that there are two pathways to decision making : intuitive and deliberative and that there are blind spots inherent with the former for the reasons explained.

AdrianGA said:
If what you said there is true then there would be no way in hell that paramedics, soldiers, policemen, firemen, air traffic controllers, astronauts, professional fighters etc. would be able to perform under pressure, and quite frankly....and with all due respects, it would be insulting to those people to even suggest that traders face riskier and more uncertainty than what they do. We risk losing money when we're wrong....their decisions risk losing lives.

I am glad you brought up these group of personnel to illustrate our differences on this subject of decision making under stress. Your view if I understand it correctly is that snap decisions are basically intuitive. You even inferred that it is associated with strong emotions. Such a description is what Psychologists Daniel Kahnemants termed an intuitive mind.
Those group of professions that you alluded can perform under stress not because they are trained to react intuitively. Their professional conduct are developed through constant drills and continuous training of set procedures so that when under stress they perform as trained. In effect they are constantly developing their deliberative mind so that when having to make decisions under stress their training kicks in automatically. Imagine how would a combat unit when under fire react if each personnel is driven by its own intuitive feel. There would be no cohesion as a unit. Their constant training and drills are what elevates their performance. Similarly as traders, we do our drills, follow a set of trading process and develop the discipline and behaviour over a long period. Would this break down under extreme stress? It is possible and often do but that is not the scope of our conversation.

AdrianGA said:
If you refer back to what I said, you'll notice that I mentioned the accuracy of snap judgments depends on how experienced and comfortable you are in your respective field. And as I stated, it is something you learn through experience.
I've seen people who are far better at this than I am who have this uncanny ability to make very accurate snap judgments most of the time. Why? Because of unconscious competence...and how do you achieve that? Repetition. Anyone with a little bit of common sense knows that.
I really am trying to see what you're getting across, yet I also realise that you don't like my article which is fine by me because you are fully entitled to your thoughts and opinions.
And while I appreciate and enjoy this debate with you, I also think it's fair to assume that the readers aren't simpletons, but instead are most likely highly intelligent and more than capable of not only understanding, but also probably able to relate to that piece of common sense I presented in some way or form even if they don't actively use it as part of their trading per say.
Had I passed on a life-altering piece of wisdom that nobody had heard of then I would wholeheartedly agree with you that I needed to go into a much deeper explanation of what I meant. But since it isn't the case and merely serves a "reminder" or "suggestion" of another aspect of their inner edge that can be worked on and developed (myself included as this is after all a never-ending process), I didn't' see the need at the time of writing the article to break down such a simple concept. And if anyone feels that I didn't express myself in a correct manner then I apologise for that.

I had previously explained that just mentioning intuition as a form of decision making and developing that through experience wasn’t exactly helpful. I provided the reasoning and also I did suggest it might be more useful if you could expand on the subject. Unfortunately you chose not to.

Quantt · Feb 19, 2018

Brumby said:
I am glad you brought up these group of personnel to illustrate our differences on this subject of decision making under stress. Your view if I understand it correctly is that snap decisions are basically intuitive. You even inferred that it is associated with strong emotions. Such a description is what Psychologists Daniel Kahnemants termed an intuitive mind.
Those group of professions that you alluded can perform under stress not because they are trained to react intuitively. Their professional conduct are developed through constant drills and continuous training of set procedures so that when under stress they perform as trained. In effect they are constantly developing their deliberative mind so that when having to make decisions under stress their training kicks in automatically. Imagine how would a combat unit when under fire react if each personnel is driven by its own intuitive feel. There would be no cohesion as a unit. Their constant training and drills are what elevates their performance.

Thank god pilots go trough constant check lists, doctors do a lot of conclusive test before diagnosis and so on and so forth...

Just imagine the pilot flying you on gut instinct: the plane looked good at a first glance before take off

AdrianGA · Feb 21, 2018

I am simply pointing out that studies in decision making under conditions of risk and uncertainty suggest we tend to default to the intuitive path which unfortunately is sub optimal in terms of decision making. This is far off from the notion that somehow society would collapse because decision making is incapacitated. I would also point out that research conducted by Professor Richard Blonna (William Paterson University) an expert in stress and anxiety explains, there are universal actions that the brain and body perform when our stress response is triggered. It is the way we are genetically programmed. The body automatically redistribute oxygen, breathing becomes rapid to oxygenate the blood stream, skin pore is open, our digestive system shuts down as energy is re-directed, salivation stops. Mentally our focus becomes narrowed as our attention is directed to the perceived threat. Our ability to make sound and considered judgement becomes impaired. It is at this point that as traders we tend to make sub optimal or at worst irrational decisions.

A cross spectrum of the population will obviously vary in term of “degrees’ when faced with identical situations. The point is not about picking on any individual or about fairness but central in it is an informed discussion about the issue based on facts and not opinion.

No where in my discussions are there suggestions that because of the conditions described that somehow accurate snap judgements are not possible. The point is simply that there are two pathways to decision making : intuitive and deliberative and that there are blind spots inherent with the former for the reasons explained.

I am glad you brought up these group of personnel to illustrate our differences on this subject of decision making under stress. Your view if I understand it correctly is that snap decisions are basically intuitive. You even inferred that it is associated with strong emotions. Such a description is what Psychologists Daniel Kahnemants termed an intuitive mind.
Those group of professions that you alluded can perform under stress not because they are trained to react intuitively. Their professional conduct are developed through constant drills and continuous training of set procedures so that when under stress they perform as trained. In effect they are constantly developing their deliberative mind so that when having to make decisions under stress their training kicks in automatically. Imagine how would a combat unit when under fire react if each personnel is driven by its own intuitive feel. There would be no cohesion as a unit. Their constant training and drills are what elevates their performance. Similarly as traders, we do our drills, follow a set of trading process and develop the discipline and behaviour over a long period. Would this break down under extreme stress? It is possible and often do but that is not the scope of our conversation.

Once again, you keep on repeating what I've been saying since having explained my point of view to you and everyone else who has read this thread:

"I am glad you brought up these group of personnel to illustrate our differences on this subject of decision making under stress. Your view if I understand it correctly is that snap decisions are basically intuitive. You even inferred that it is associated with strong emotions. Such a description is what Psychologists Daniel Kahnemants termed an intuitive mind.
Those group of professions that you alluded can perform under stress not because they are trained to react intuitively. Their professional conduct are developed through constant drills and continuous training of set procedures so that when under stress they perform as trained. In effect they are constantly developing their deliberative mind so that when having to make decisions under stress their training kicks in automatically. Imagine how would a combat unit when under fire react if each personnel is driven by its own intuitive feel."

Have I not stated the EXACT same thing (on multiple occasions I might add) that you would only "intuitively" know what to do once you've achieved a level of training that allows you to be unconsciously competent after PLENTY of "deliberate" training and having built up confidence in any respective field? The intuitive mind only becomes useful in stressful situations by saving time on decision making processes and appropriate responses AFTER the deliberate mind has done its part by drilling the correct concepts etc. into it through repetition.

Imagine trying to act "intuitively" in those situations you described without having been through "deliberate" training to handle them, you'd want to curl up in a ball and cry or run away from danger. I.e. the default reaction your research quotes allured to.

On a more basic level, it would be like pitting a complete novice against a professional striker or grappler and telling them that they'll be OK if they rely purely on intuition. What kind of idiot would even suggest that? Anyone with half a brain cell knows that you'd get busted up or turned into a human pretzel if you relied on such utterly stupid advice.

You know as as well as I do that you will only intuitively know what to do once you've been through extensive training.....that is more often than not the difference between a black belt and a white belt, and not athletic ability per say. The black belt knows exactly what to do without even having to think about it, he can apply multiple forms of attack and knows of multiple defenses to those attacks that the the white belt will attempt without even breaking a mental sweat.The white belt on the other hand has to consciously think of every possible angle of attack or defense that his limited knowledge and ability is able to provide and will likely crack under any pressure due to lack of experience or knowledge.

Another thing I'd like to point out is that if you refer to other parts of the article, you'll notice that I said you also have to do a lot of homework by means of crunching numbers among other things. Doesn't that tell you that I obviously believe that a lot more goes into trading than pure emotion and intuition?

Finally...of course there are emotions linked to anything you do even at the most basic of levels. i.e. you feel good/bad/confident/fearful/hopeful/uncertain etc. about a trade you're about to get in or out of. Did I not also say that you need to manage those emotions correctly in order to avoid making costly mistakes?

If anyone tells me me that none of those emotions arise in any shape or form whenever trading decisions are made then that person is either a bot or possibly a psychopath.

Disclaimer: For goodness sake NO, I'm most definitely not calling you a psychopath nor a bot so if you feel the need to copy and paste some more research to explain EXACTLY what psychopaths are in order to delve into the much deeper complexities of their psychological and genetic make-up respectively consist of, or find and exploit even the tiniest potential flaw in what I said or possibly inferred from your perspective, then you're welcome to do so and let someone else take the time to read through it. I was merely illustrating by example not suggestion.

I already have spent far too much time on this thread, so if anyone else reading this doesn't understand my point of view on this sliver of an aspect related to my article, or wishes to take it out of context and run with it....then more for you. I will not spend anymore time trying to make this any clearer than I already have. So on that note, this is my last response and I'm tapping out of this one.

Good day to you all and best of luck with your trading.

divyanshisharma · Jul 5, 2018

Everything is true in your story and i agree with the fact you stated later in the article.!

Trading Careers Life as a Trader

Brumby

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AdrianGA

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Brumby

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mpups

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AdrianGA

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Brumby

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Quantt

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AdrianGA

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divyanshisharma

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