Becoming a student of the market

The sport of kings.
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ShaunWhite
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napshnap wrote:
Mon Jun 04, 2018 7:47 am
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
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Has anyone seen the "Bomber" recently? Aaaah the good ol' days....................
stueytrader
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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! 8-)
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ruthlessimon
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stueytrader wrote:
Mon Jun 04, 2018 4:02 pm
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! 8-)
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!! :D
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ShaunWhite
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stueytrader wrote:
Mon Jun 04, 2018 4:02 pm
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?
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Derek27
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In my view psychology can be a major advantage but never on it's own an edge.
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ruthlessimon
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ShaunWhite wrote:
Mon Jun 04, 2018 4:49 pm
I've rapidly been approaching that conclusion.
Ok Shaun, I'm gonna hit you with a question:

-The price goes through 2.0 @ 3mins, Hcap - whats the probability it trades 1.91, before 2.1?

If a trader backs the 2.0, then gets "scared" because it trades 2.06 - but doesn't know the above figure - then I have no sympathy, & the reason for his lack of confidence, is because he doesn't have a quantitative leg to stand on.

Peter could easily, answer that question, that would be like "starter" question on a pre-race exam :D
spreadbetting
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Maybe it's all just a case of semantics and we're all in agreement anyways Shaun ;)

Not sure how a pyschological edge determines which way the market will move and ultimately wins them money, but it's fine by me if they believe mindset and pyschology are the main talents you need to trade. They must be raking it in or at least need a bigger librry for all the copies of trading in the zone and ebooks they've collected.

I'm actually surprised no one's gone for the 10,000 hour rule and mentioned experience is the main player, that usually gets touted quite a bit as a winner to beat the market. Betfair's been going for 18 years now so there must be thousands of players who've hit that 10,000 just by doing around 12 hours a week, with Derek's round the clock trading he'll probably rack those 10,000 hours up in a year or two.
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ShaunWhite
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ruthlessimon wrote:
Mon Jun 04, 2018 4:46 pm

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?

If he knows that, on average (via a spreadsheet) the high is around 15 ticks, & he still lays it, that's an IQ problem!! :D
Knowing the average move in this scenario should be a very small part of the descision to get involved, unless you're a bot.

Again I challenge any cold trader to prove that they have such detailed knowledge of these scenarios on instant recall with sufficient depth to be practically useful. "This does that, x does y, b moves 5 ticks, jockey on the fav is on a double ...what's the exact average expencancy"....?

As far as I know, the std goto for your 'world's best' when cold trading is still order flow, undoubtedly refined by 1000s of hours of soft 'this does that more often than not' experience. I'm not seeing or hearing that "I did that because the average move in situation X is 14.3 ticks".

I suspect the evidence and his confidence in it could be be categorises as it would be in law..

2.1.1 Some evidence
2.1.2 Reasonable indications
2.1.3 Reasonable suspicion
2.1.4 Reasonable to believe
2.1.5 Probable cause
2.1.6 Some credible evidence
2.1.7 Substantial evidence
2.1.8 Preponderance of the evidence
2.1.9 Clear and convincing evidence
2.1.10 Beyond reasonable doubt


Knowing/learning what causes the ups and downs that go to make up your average is far more useful. Your average consists of pluses and minuses, I don't want to get involved with the minuses if i can help it.

Let's take a situation that produces +5 ticks 5 times and -10 ticks 5 times. A -2.5 situation? If you identify the reason why the negaive ones go below 0, or what causes the a -5 to go to -10, there is still oppertunity.

This logic then applies to all scenarios, even the ones with an average negative expectancy, cheery pick the plus side. Opperunity exists at all times and in all situations.
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ruthlessimon
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ShaunWhite wrote:
Mon Jun 04, 2018 5:21 pm
Knowing the average move in this scenario should be a very small part of the decision to get involved, unless you're a bot.

Again I challenge any cold trader to prove that they have such detailed knowledge of these scenarios on instant recall with sufficient depth to be practically useful. "This does that, x does y, b moves 5 ticks, jockey on the fav is on a double ...what's the exact average expencancy"....?
True, that is something I've questioned myself - although could it be argued that thousands of small quantifiable edges, make up what we call "experience/discretion"?

It would tally with a scoring methodology though (pardon the pun) ;)

Which is also how'd I'd deem order flow. A backer is not letting it pass x.xx, the 3rd just broke through 10.0 which means x - which means the probability of a steam just got even higher.
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ShaunWhite
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ruthlessimon wrote:
Mon Jun 04, 2018 5:02 pm
The price goes through 2.0 @ 3mins, Hcap - whats the probability it trades 1.91, before 2.1?

Peter could easily, answer that question, that would be like "starter" question on a pre-race exam :D
From which direction? What's the 2nd fav doing? How general or specific is your question?

By looking in the stats I'm sure he know your answer, anyone could. But is that knowlegde on instant recall? Is it the reason he does what he does, or is it part of a larger body of evidence that could easily outweigh it?

Only one person can answer those.
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ShaunWhite
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...scoring system.....exactly that!

That PW scoring system is like the Enigma machine, mine's like those punched card computers you used to make out of cereal boxes.
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ruthlessimon
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ShaunWhite wrote:
Mon Jun 04, 2018 5:39 pm
By looking in the stats I'm sure he know your answer, anyone could. But is that knowlegde on instant recall? Is it the reason he does what he does, or is it part of a larger body of evidence that could easily outweigh it?

Only one person can answer those.
He might not know the probabilities on recall, but he'd know it's a +expectancy play, & roughly where the price should hit.

& this is why trading is complicated. The picture changes.

A trader could have probabilities on the fav breaking 2.0 (steam), & probabilities of the fav steaming/drifting if the 2nd does x. Statistics that were created independently, but in a single race both apply - & that's where the discretion comes into play. Suddenly in a scoring system a +3, just became a -5
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ShaunWhite
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ruthlessimon wrote:
Mon Jun 04, 2018 6:01 pm
He might not know the probabilities on recall, but he'd know it's a +expectancy play, & roughly where the price should hit.
I'm going to lay that quantum of proof, it's definately on the drift!

I'm much happier with it now it's just a "+ve and roughly where" rather than a fact to within 2dp.
;)
stueytrader
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In relation to the most recent posts, we could of course widen our definition of what we mean by psychology.

Of course, there are all of the more emotional, control and discipline elements (probably the most common use on here for the word).

But, there are also a vast range of other 'psychology' aspects in trading that are less clearly related to the above - for example confidence estimations, expertise and judgment, decision making. There are a range of issues of clear thinking essentially that move well beyond the simplistic definition of psychology being about going on tilt. There are also wider issues of your more general psychology - e.g. what kind of person are in you generally in life, confident/overconfident, cautious, anxious, happy, depressed, etc etc...and your life setting which will clearly relate once again to your psychology. In essence, we are presenting something of a straw man if it is simply about not going inplay etc.

Perhaps some of that was also what Peter meant in saying it was an edge?
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