Becoming a student of the market

[Dallas]

Wow, that was 8 years ago, where have you drummed that up from?

That's interesting, because it shows the markets have changed somewhat.

We now see big moves and spikes on football and sports that we didn't see so much in 2010.

I think this is due to a massive increase in automation, and when something starts to move, lots of bots just jump on board. Plus, I think we are seeing more distortion within markets, possibly Betfair themselves

I think its also worth adding the effects of xmxm to that list

[LeTiss]

I think its also worth adding the effects of xmxm to that list

Yes XM has altered the markets hugely

[ShaunWhite]

Honestly, I bloody wish it was all psychology. Trading would be so fricken easy, I just turn up happy, end green.

The bigger the edge you have the less psychology you need.

Even a lunatic can succeed if everything they touch turns to gold but if you spend all day on a knife edge you'll need your wits about you.

[ruthlessimon]

where have you drummed that up from?

You might have had a stalker in 2016

Somewhere I've got a file on you; but that thread has been on my harddrive for ages

[ShaunWhite]

where have you drummed that up from?

Somewhere I've got a file on you; but that thread has been on my harddrive for ages

Look out LeTiss, it's ruthlesssimonovski from the KGB!

[Kafkaesque]

But one has to query the contradiction of "publicly sharing an edge". If an "edge" is lost/weakened if shared; then why is psychology advice shared so openly? Why is the creation of the blade so rare; if psychology is so important to make it work?

I've taken the liberty of picking this from a longer post.

My take is that there's two forces at work regarding what you question.

First, it's down to availability. You've touched upon it this yourself in several posts. When giving advice on psychology, it's usually a combo of personal experiences and whatever science/pseudo-science is out there. It feels a lot more like sitting around a campfire sharing stories with a morale, than sharing strategies which feels more like sharing valuable IP, you've produced yourself, for free.

Secondly, there's a human nature bias to me. If I run a strategy testing at small stakes, and it falls flat on its face, I'm fine. The majority will during testing. I've - hopefully - learned something from the process, I can take with me going forward. It's okay, it was suppose to happen (more often than not). If it fails because there's a breakdown in my mindset approach, I've not learned whether the strategy is viable, and more importantly it's not suppose to happen. I should be able to control my mindset. The frustration is 1000 times bigger in the second scenario, and thus people who are kind enough to want to help others in the first place will jump to assist others in avoiding that frustration, which should - in theory - be very avoidable.

My two cents anyway.

[ruthlessimon]

The bigger the edge you have the less psychology you need.

That's irony

See am I nuts here Shaun, cause I feel like I am sometimes

If the fav steams 2%, & the 2nd didn't drift. Is it better to lay the fav, lay the 2nd, or lay the 3rd? Or is it better to do the complete opposite?

If a trader doesn't know; then how is it fair to blame their psychology?? The advice that should be given IMO, is how can the trader learn to test that idea properly.

Am I a lunatic for thinking this way??

[ShaunWhite]

If the fav steams 2%, & the 2nd didn't drift. Is it better to lay the fav, lay the 2nd, or lay the 3rd? Or is it better to do the complete opposite?

If a trader doesn't know; then how is it fair to blame their psychology?? The advice that should be given IMO, is how can the trader learn to test that idea properly.

I think not having an edge is the cause of not succeeding, but poor psychology is always the reason for failure.

Although I accept that certain setups occur regularly and if recognised they can provide a favorable outcome, they are always loaded with variables that appear to be impossible to insert into a predictive model.

I'd go further and say that I don't think anyone out there could prove or test your example to any degree that would make it practically usable. Even Peter has said (I think) that his modeling isn't predictive. That's why he trades order flow, ie sentiment expressed but not yet enacted rather than trading based on historical moves.

I've said it already today elsewhere, if a reliable predictive model existed for horse racing then experience and 1000s of hours of screen time wouldn't be necessary. If such a model/edge existed or could exist then someone, somewhere would be selling it and have nothing but happy successful students. Knowledge like that, or even the existence of knowledge like that, doesn't remain a secret for 10yrs or more in a world populated by so many large egos.

Before asking how your answer can be found I think you need to ask if it can be found.

[ShaunWhite]

Because your setups are all based on market movements up until time t, I think you're missing the key information ie what's actually happening at time t.

The way the price volumes are changing and the very human interpretation of what's real money and what's speculative, I think, are the best and maybe only ways to predict how prices might move in the next 10 or 20 seconds.

You don't predict a breakout from the history, you predict it by the fact that the money at the sup/res level either disappears or starts being taken 'unusually' quickly. That's a bitch to find and prove in data, but second nature to your gray matter after your 10k hrs.

[napshnap]

Shaun, you making it too esoteric.

they are always loaded with variables that appear to be impossible to insert into a predictive model.

Can you name some? Don't you think that this problem is more of lack of possibility (intelligence) to extract and formalize trading rules, indicators, conditions and parameters from our subconscious than complete impossibility to do so?
I faced and facing this challenge when try to transfer my trader's experience to my bots, and I must say that I have some success. And this process is pretty interesting, I think this experience is close to those experiences who try to teach cars autopilot to self drive. Of course, my experience is much, much more primitive (cause I'm working alone, don't have proper education and not so smart ).

[ShaunWhite]

Shaun, you making it too esoteric.

they are always loaded with variables that appear to be impossible to insert into a predictive model.

Can you name some?

You could be right about that, and also right that I can't accurately explain what I do manually. The only thing I can think of at the moment is what I said in the follow up message about the behavior of the queue of money relating to phrases like 'it wants to be taken' vs 'it doesn't want to be taken'

[mobius]

Has anyone seen the "Bomber" recently? Aaaah the good ol' days....................

[stueytrader]

A very interesting discussion for me (those that have seen some of my posts would know I'm into the psychology angles).

A couple of points: if you are naturally someone who has little issue with control/chasing/discipline/motivation, and you have already found some good edges, then yes I'd agree Psychology probably has little to do with things.

However, if you are like arguably the majority, people who will find at least some trouble with any or all of the above, then Psychology is certainly huge, edge or not.

A couple of other points in support of psychology, I have certainly been someone who has worked very hard over the years on my psychology, and I can say for certain it has positively effected my actual results. Either that or it's just a coincidence, but I'm pretty sure it's not that.

I also remember a reply from Peter himself on here once (to one of my posts) that he considered psychology one of his biggest 'edges' in itself (or very similar words) - can't get a better advocate for psychology than the man himself!

[ruthlessimon]

I also remember a reply from Peter himself on here once (to one of my posts) that he considered psychology one of his biggest 'edges' in itself (or very similar words) - can't get a better advocate for psychology than the man himself!

But he also has the most quantifiable (& discretionary) knowledge - of any trader in the world. Which I think, personally, is a larger factor for his success; & continued success.

A trader who see's a price drifting, gets FOMO, then lays it after 20ticks, hoping for more, but doesn't know the average move on this race etc - cannot be blamed for his psychology surely?

He doesn't know any better!!

If he knows that, on average (via a spreadsheet) the high is around 15 ticks, & he still lays it, that's an IQ problem!!

[ShaunWhite]

he considered psychology one of his biggest 'edges' in itself

I've rapidly been approaching that conclusion.

Another example of how we seem to be good on here at discussing topics without first defining the parameters.....

'Edge' is probably the most common one and is a totally inadequate catchall. It's suprising that for a mature subject it's not spoken about more often in sub catergories. Mathmatical edges, psychologial edges, fundamental knowledge edges (eg knowing about horses), time edges, observational edges.....there must be a dozen.

New people especially must think 'edge' means something special you've found in excel. Then they're told that if you don't have an edge they will certainly fail, they dispair because they don't have the data or the understanding of 'predictive analytics', 'trend anaysis', 'modelling' and give up disappointed and disgruntled.

We should veto the use of 'edge' unless it's qualified, perhaps one of the old-timers (PW cough cough) could come up with a list of the many types of edge and some friendly acronyms? Attaching your name to the etymology of this sort of thing is what industry leaders often do?