Ideas

  • “It’s About Time” — Or, Isn’t it?

    There is a difference between working on a problem and focusing on a solution.  Thus, trying to improve performance is different than focusing on limiting losses. 

    Einstein said: "We cannot solve our problems with the same thinking we used when we created them."

    It got me thinking. Most trading charts are time-based (meaning that price change is measured against time).  But maybe looking at price change in other ways would provide a different perspective.

     
    There are several interesting techniques gaining favor among technical traders.  These include measuring price change based on a certain volume traded or a constant range of directional movement.  Here is a link to a brief article about this in StockCharts.com.
     
    In some respects, these are "smoothing" techniques.  Nonetheless, they present a different picture of the market, and are something worth investigating.
     
    Here is how the S&P 500 Index looks like in one of these charts.
     
    080613 SPX Renko Chart

  • Capturing To Do Items and Ideas to Get Things Done

    080606 notepadAn Old Take on New Ideas:

    How many times have you tried to remember something that you knew you
    were forgetting? As I get older, it seems to happen more often. I'm not
    sure if it's because of age, or because I think more and do less.
    Nonetheless, I love having a process to capture, store, and retrieve,
    relevant information.

    For years I've been "a gadget guy." I'm the guy that waits in line to buy the first hot new phone. I always have the best PDA, the newest laptop. And I constantly try different software to capture ideas, produce mind maps, or otherwise give me a creative and competitive advantage.

    Surprisingly, the newest addition to my arsenal of productivity tools is a small pad of paper. Yes, I now carry a small pad of paper in my pocket, and I pull it out to capture ideas, phrases, and to-do items throughout the day. It's quick, easy, and I don't have to worry about it recognizing my handwriting. I recognize my handwriting.

    Throughout the day, I simply write the ideas, phrases, key words – and of course the to do items that I should do, want to do, or want someone else to do.   

    At the end of the day (or when my page is full) I call Copytalk and dictate the whole list into the telephone. A few minutes later, I get an e-mail with all of the items in electronic format. I then copy these and simply paste them into a web application called Toodledo, which is a categorized to-do list accessible online.

    Toodle-do is a great place to help me get things done. It allows me to list each task, categorize it in ways I want, as well as create priorities, due dates, and different tags that you could use for locations or roles. I very quickly ended up with close to 1,000 to-dos sorted in many categories. So when I get an idea on something to write about, or come up with new development projects or things to talk about with friends, I have one place to go.  Best part for me is that when I'm looking for something, this list is easy to search, easy to find, and easy to keep up-to-date.

    All-in-all, it's a pretty good system, and I love how it feels to empty my brain every day.

  • Why Analysis Is Often Flawed

    Imagine thousands of researchers asked to analyze the market, or an
    event like a Fed Statement. Each is searching for a substantial
    answer. Trouble is, there's bias towards "substantial."

    Is there really
    an "Answer"? Doesn't each tick, each move, produce new questions?

    It's
    sometimes like a "Magic Eye" hidden picture. You are searching for the
    vision and all you see is nonsensical chaos. Yet when seen from the right perspective, and with the right focus,
    there is a higher order and the picture becomes clear.

    Time plays a
    role here. Timeframe plays a role here. But so does knowing when the signal to
    noise ratio tells you not to pay attention. Sometimes noise is just noise.

    I've
    been thinking about how the market whispers when to play offense, when
    to play defense, and when not to play at all.  What gives us a clue
    that something meaningful is happening?  Is it:

    • Price Moves;
    • Volume;
    • When Some Moving Average is Above or Below Some Other;
    • Sentiment
    • Fundamental Data
    • Technical Indicators?

    As someone who's played this game for a long time, I'm not looking for magic bullets.  But if I wasn't willing to look, it would be difficult find.  So, model-building and testing will continue.  I'll share more as the picture comes into focus.

  • Why Analysis Is Often Flawed

    Imagine thousands of researchers asked to analyze the market, or an
    event like a Fed Statement. Each is searching for a substantial
    answer. Trouble is, there's bias towards "substantial."

    Is there really
    an "Answer"? Doesn't each tick, each move, produce new questions?

    It's
    sometimes like a "Magic Eye" hidden picture. You are searching for the
    vision and all you see is nonsensical chaos. Yet when seen from the right perspective, and with the right focus,
    there is a higher order and the picture becomes clear.

    Time plays a
    role here. Timeframe plays a role here. But so does knowing when the signal to
    noise ratio tells you not to pay attention. Sometimes noise is just noise.

    I've
    been thinking about how the market whispers when to play offense, when
    to play defense, and when not to play at all.  What gives us a clue
    that something meaningful is happening?  Is it:

    • Price Moves;
    • Volume;
    • When Some Moving Average is Above or Below Some Other;
    • Sentiment
    • Fundamental Data
    • Technical Indicators?

    As someone who's played this game for a long time, I'm not looking for magic bullets.  But if I wasn't willing to look, it would be difficult find.  So, model-building and testing will continue.  I'll share more as the picture comes into focus.

  • What is Your Intention?

    Mellensmartblow_rough_sea
    Fear, greed and hope comprise the Bermuda Triangle of trading. Many dreams were battered or lost because of them.

    In trading, my goal is to make and keep money, consistently. It isn’t to be right, or clever, or even creative. Reducing human bias and error are benefits of using automated trading systems; and ultimately that helps us intelligently respond to the markets.

    How does that apply to life?

    Oh, a small question …

    A friend of mine called me this week to share a thought. He said that he was trying to stop simply responding automatically to situations. Instead, he was going to consciously focus on his "intention" before responding.

    Imagine how different the world would occur to you if you brought "intention" into focus instead of mindlessly surrendering to your first feelings and actions.

    Triumphant_man_on_water_200p_2
    My first reaction often is to ask "what is the best next step?" Perhaps you do something similar? On many levels that is a resourceful question. Yet, what would happen if, instead, you brought your intention into focus and asked what role you could play to best support that intention?

    Your role directly affects the options you perceive.

    Let me know how that works for you.

  • What is Your Intention?

    Mellensmartblow_rough_sea
    Fear, greed and hope comprise the Bermuda Triangle of trading. Many dreams were battered or lost because of them.

    In trading, my goal is to make and keep money, consistently. It isn’t to be right, or clever, or even creative. Reducing human bias and error are benefits of using automated trading systems; and ultimately that helps us intelligently respond to the markets.

    How does that apply to life?

    Oh, a small question …

    A friend of mine called me this week to share a thought. He said that he was trying to stop simply responding automatically to situations. Instead, he was going to consciously focus on his "intention" before responding.

    Imagine how different the world would occur to you if you brought "intention" into focus instead of mindlessly surrendering to your first feelings and actions.

    Triumphant_man_on_water_200p_2
    My first reaction often is to ask "what is the best next step?" Perhaps you do something similar? On many levels that is a resourceful question. Yet, what would happen if, instead, you brought your intention into focus and asked what role you could play to best support that intention?

    Your role directly affects the options you perceive.

    Let me know how that works for you.

  • Focusing on the Right Things

    A few years ago I had lunch with Larry Connors (who is a well-known trader and runs the website TradingMarkets.com).  We were talking about what makes great traders great, and what causes some of them to get in trouble.

    Larry said he believes that many people with a real "edge" fail to exploit it because they get bored.  The personality trait that helped them develop their system often leads them astray; they focus on finding new things rather than on making money with what they know works.

    As I think about this, I have a slightly different explanation.  Most systems with an "edge" only have a small edge.  That means that successful traders suffer frequent set-backs, drawdowns and situations where they did everything right, but still lost money.  It is natural for them to use their natural talents to avoid unnecessary pain, right?

    Most successful businesses balance operational excellence and making money now with research and development (which helps ensure that they will make money in the future).  So, it makes sense that the best traders continue to grow, learn, and make new and better distinctions.

    One of the Siren songs of trading, though, is that the fear of losing has so much gravity that it often pulls focus from more productive endeavors.  In other words, there is a difference between "working on a problem" and "working towards a solution."

    Focusing on what you are trying to avoid is distracting and painful.  In my experience, the best results come when the focus is on what you want.

  • Focusing on the Right Things

    A few years ago I had lunch with Larry Connors (who is a well-known trader and runs the website TradingMarkets.com).  We were talking about what makes great traders great, and what causes some of them to get in trouble.

    Larry said he believes that many people with a real "edge" fail to exploit it because they get bored.  The personality trait that helped them develop their system often leads them astray; they focus on finding new things rather than on making money with what they know works.

    As I think about this, I have a slightly different explanation.  Most systems with an "edge" only have a small edge.  That means that successful traders suffer frequent set-backs, drawdowns and situations where they did everything right, but still lost money.  It is natural for them to use their natural talents to avoid unnecessary pain, right?

    Most successful businesses balance operational excellence and making money now with research and development (which helps ensure that they will make money in the future).  So, it makes sense that the best traders continue to grow, learn, and make new and better distinctions.

    One of the Siren songs of trading, though, is that the fear of losing has so much gravity that it often pulls focus from more productive endeavors.  In other words, there is a difference between "working on a problem" and "working towards a solution."

    Focusing on what you are trying to avoid is distracting and painful.  In my experience, the best results come when the focus is on what you want.

  • The Rhythm of Writing

    Writing_250_p
    Here is a trick I use to write better and more naturally. It is called "timed writing" and it has been easy and effective for me. This post will briefly describe how it works.

    First, pick a song to listen to while doing the exercise. Then I get a piece of paper and a pen. When the song starts, begin writing. Don’t type or use a computer. Don’t pause, don’t stop. Don’t think. Don’t correct your spelling or grammar. Just write. If you can’t think of anything else to write write whatever you say to yourself; even if it is "what should I say here?" But, don’t let the pen stop writing until the song stops.

    Second, use another song to review what you wrote. When I do this step, I cross-out things I didn’t like. I make notes, annotations, draw lines connecting one paragraph to another, insert comments or write trigger words. Sometimes I outline a different idea flow. But I don’t stop until the song stops. This is a great time to check the intention and attitude of the piece. Sometimes I look at a paragraph and ask myself "what is this supposed to say?" And I write the answer. It is often a great headline, lead-in, or summary. When the song is over, I often take a break to clear my head.

    The next step looks similar to the first. Put on a song, and re-write the whole thing … from the beginning … with the new structure, comments and whatever else comes out in the process. By this step, the piece is usually dramatically better than it was the first time. However, a few more changes often happen when I re-enter the piece into the computer.

    Handwriting seems to access different parts of the brain and creative process than typing does.  Somehow the combination works for me.  Try this and let me know what you think.

  • The Rhythm of Writing

    Writing_250_p
    Here is a trick I use to write better and more naturally. It is called "timed writing" and it has been easy and effective for me. This post will briefly describe how it works.

    First, pick a song to listen to while doing the exercise. Then I get a piece of paper and a pen. When the song starts, begin writing. Don’t type or use a computer. Don’t pause, don’t stop. Don’t think. Don’t correct your spelling or grammar. Just write. If you can’t think of anything else to write write whatever you say to yourself; even if it is "what should I say here?" But, don’t let the pen stop writing until the song stops.

    Second, use another song to review what you wrote. When I do this step, I cross-out things I didn’t like. I make notes, annotations, draw lines connecting one paragraph to another, insert comments or write trigger words. Sometimes I outline a different idea flow. But I don’t stop until the song stops. This is a great time to check the intention and attitude of the piece. Sometimes I look at a paragraph and ask myself "what is this supposed to say?" And I write the answer. It is often a great headline, lead-in, or summary. When the song is over, I often take a break to clear my head.

    The next step looks similar to the first. Put on a song, and re-write the whole thing … from the beginning … with the new structure, comments and whatever else comes out in the process. By this step, the piece is usually dramatically better than it was the first time. However, a few more changes often happen when I re-enter the piece into the computer.

    Handwriting seems to access different parts of the brain and creative process than typing does.  Somehow the combination works for me.  Try this and let me know what you think.