≈ Kind of suit is this? ≈
– Somehow he is overwriting the system’s priorities.
– The human element will always be present. Compassion, fear, instinct will always interfere with the system.
—Robocop (2014)—
We are not automated machines with AI capabilities. We are much more complex than that. Not even close to understand ourselves and we are already building machines our own images.
When a given system depends on us to execute it, we fail to deliver what it needs. We think too much, contextualize too much, hesitate too much, feel too much, analyze too much, think too much, fear too much, hope too much. No wonder why computers are so fast: they just execute the rules inside the system they were built to be running. We don’t.
But we can. Just like computers, we can run the rules without hesitation.
This is what we call the System-Thinking approach. It consists of a mindset that neutralizes our feelings and emotions. Fear, greed, hope, and despair, although part of our innate set of evolutionary capabilities are bad for trading systems. The System-Thinking approach brings order to this chaos, removing the (too much) human part from trading.
However, the System-Thinking approach is not a built-in functionality. We have to train it.
If we want to fly like birds we invent an aircraft. If the stars seem out of reach we invent a spaceship. If the ocean is too deep we invent a submarine. If we want to touch heavens we invent immortality. Why can’t we just pretend we are part human, part machine and run our systems without hesitation?
Kind of suit is this?
It’s not a… suit, Alex. It’s… it-it’s you.
Chart of the Day
It’s the end of the world as we know it.
No, not at all. The chart above depicts the Crude Oil futures contract (may 2013 › nov 2018, weekly). The ≈3-year uptrend is now broken. That beautiful channel is shattered. On the left side of the image, you will find another break of support which has led to an almost 3-year bearish trend.
Study the cycles of the product you are trading. Study the seasonality, the supply and demand forces. Study the political powers that go behind the price movement. Back up your investment thesis with something tangible but not set in stone. Things can change and you can be wrong. Have a system with rules in place and execute them with no room for improvisations. Leverage, position sizing, and risk/reward rules are key to your long-term survival in the financial markets.
Video of the Day
Robocop Trailer
Kind of suit is this?
It’s not a… suit, Alex. It’s… it-it’s you.
Today’s Lineup
TALES OF A TECHNICIAN
Of Liars and Ruin
Any time I hear of someone blowing up a trading account, particularly if they’re using a strategy anywhere remotely close to mine, I always take time to reassess my risk protocols. The human side of me (isn’t that my only side?) worries that their misfortune is contagious, that I too might succumb to ruin.
Traders Lounge 11am EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
The Coaches Show 8:30PM EST
This is our weekly MasterMind group. Join the coaches tonight, 8:30pm EST to discuss the markets and help you prepare for the week.
Halftime Report 12:30pm EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Market Recap 4:30pm EST
The Market Recap is designed to give you a quick overview of the day that was. While brief, this report is designed to cover all of the major events that drove the markets that day and help you plan for the trading day ahead.
