By randomness I refer to unforeseen events. Some of the events which have affected my investments / trades - earthquake in Japan, China suddenly announcing the reduction in the amount of rare earths it will export, almost the entire executive team of a mid-cap mining company killed in a plane crash in Africa (very tragic incident), a way better than expected jobs report, a European politician talking his/her mouth off in front of the press.... all these events are unpredictable and influence the market. My point is that the author is not making any ground breaking revelations, we have all been there before.
And I agree with you, while there isn't a equation which describes the market, it is quite possible to extract money from it.
Well seeing as it seems that nearly no one is this thread has read the book, I figured I would drop my .02 on it.
This book really has NOTHING to do with the black swan, she only uses it for the basis that markets cannot be forecast, (anyone who says they can do otherwise is either delusional or lying). And when dealing with uncontrollable risk, try as you might, your logic ends up in the backseat. From there she builds an argument that most of the decisions we make while trading are based off underlying context. Anywhere from the color of the bars on your chart, to the way your mother treated you while you were growing.
The purpose of this seems to be to help you eradicate many of the trades that when looked at in retrospect, maybe you shouldn't have taken.
who knows if it works, but this week im 6/7 in my trades, and I feel more calm and collected than ever before.
I paid $30 for it from barnes and noble and I feel it was money well spent. But the book is like $17 on amazon, for that price its definitely worth the read.
But one thing I can say is, this (trading) is a very risky business. Weather you think something is right, or wrong, works or doesn't work, you darn well better know the argument. (know your enemy and all that)
P.S. Algos are only as smart as the people programming them, their only real benefit is HFT. But hey will never be greater than human instinct, and the human brains ability to adapt to new situations is F*@$ing outstanding! Computer predicting human emotions and instinct is some skylab mess.
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Ha! I had to laugh at @Lornz post - My friend, this is the mother of all "qualitative books"! For me personally that, in and of itself, is not an insult. However, I am neither completely praiseworthy nor condemning of the book's style or arguments.
First, the arguments - Denise's main thesis is that because markets are ultimately uncertain, human brains (lornz, we'll make an exception for you ) will react to the uncertainty by (like it or not) attempting to use judgment. She presents research which argues that humans cannot form judgments without emotion - we cannot, in fact, make decisions without emotion. Because of this, when we interact with the markets, we are using judgment - we are making a decision using our emotions (in addition to reason). Her main point is that, given this situation, we should be focusing quite a bit of energy and awareness on exactly what our emotional background is and how it is affecting our decisions. She distinguishes between immediate emotion (say from recent losses or recent wins) and those emotions stemming from our developmental and genetic (nuture and nature) patterning - i.e., our past relationships with Authority, Competition, and Self-Worth. Her discussion is limited beyond presenting this thesis - for instance, she gives few, if any, practical methods or examples of the latter type of emotions.
Second, the book - The voice of the book is tentative. I think Denise has some good things to say. Unfortunately I think she presents them tentatively - one gets the feeling she is writing self-consciously. She seems to be trying to defend and justify her views to an excessive degree - rather than stating them confidently and backing them up effectively. I am reading Ari Kiev's great book "the psychology of risk" and his voice is confident and direct - I don't find this to be the case with Denise's book.
If there is any discretionary element to your trading (my view is that this includes the ability to turn on and off an algorithmic system or tweak it), then I think the ideas in this book are relevant. However, I think you can get most of the meat of it from her many free, online webinars (see mirus futures and traderkingdom websites).
Hope that helps!
Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
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This was the key learning from Denise's book for me. That is:
All decisions are made with emotion whether you like it or not, or whether you believe it or not.
In situations of uncertainty where there is never enough information (such as trading markets), we are required to make judgements.
In such situations the emotions that are in play come from the subconscious, and you may not be aware they are having an impact on your judgement.
In these cases you should not try to control your emotions, but rather monitor and listen to your emotions and add them in as data - a confluence factor if you will - to your trading judgement/decision. So any trading system that has discretionary elements must (becasue of the way the human brain works) use the trader's emotion as input data before a decision can be made.
The challenge then is to understand where your emotions are at and to make sure you understand them and are using them effectively.
I thought it was a good book as it pulled together some important elements of trading psychology in a way that I have not seen before. I recomend it.
Also, for the record, Taleb's two works: "Fooled By Randomness" and "The Black Swan" were, for my money, excellent. They should be required reading.
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