Nobel Prize laureate Kahneman in his illuminating book "Thinking, fast and slow" categorizes human thinking into two systems:
System 1, fast, intuitive, emotional
System 2, slow, deliberative, logical
After spent many years in FF it seems to me that there are two categories of traders as well:
Trader Group 1, intuitive, often trade manually, discretionary, prefer the KISS principle
Trader Group 2, logical, often implement auto system or trade semi-auto, bound by statistics & mathematics
There are successful traders in both groups, however blindly following any of these doctrine would cause nothing but premature detonation of your financial well-being, or your wife's fiery temper.
Why both too simple & too complex method fails?
Too simple: lack of originality and competitive merits, too easy to be taken advantage of
ex. performance of SMA trend following system in 1950's and now
Too complex: Too many variables, over-fitting the past, no way to establish causality(Simpson's Paradox)
ex. "gazillion billion" system that performed superb in the past, blows account once go live
Why, I'm here to ask questions rather than answering them.
How do you find the balance between too simple & too complex?
How do you establish causality?
System 1, fast, intuitive, emotional
System 2, slow, deliberative, logical
After spent many years in FF it seems to me that there are two categories of traders as well:
Trader Group 1, intuitive, often trade manually, discretionary, prefer the KISS principle
Trader Group 2, logical, often implement auto system or trade semi-auto, bound by statistics & mathematics
There are successful traders in both groups, however blindly following any of these doctrine would cause nothing but premature detonation of your financial well-being, or your wife's fiery temper.
Why both too simple & too complex method fails?
Too simple: lack of originality and competitive merits, too easy to be taken advantage of
ex. performance of SMA trend following system in 1950's and now
Too complex: Too many variables, over-fitting the past, no way to establish causality(Simpson's Paradox)
ex. "gazillion billion" system that performed superb in the past, blows account once go live
Why, I'm here to ask questions rather than answering them.
How do you find the balance between too simple & too complex?
How do you establish causality?
No Highs? No Lows? Must be Bose!