Kai wrote: ↑Sat Jun 13, 2020 3:16 pm
Regarding the IQ and EQ stuff that we talked about earlier, you really don't need me to tell you how bright you are, you can tell a lot about people from their posts alone but another potentially big pitfall here is when you overthink things and are too bright for your own good, I think many including Peter have said that some incredibly smart guys and academics just don't get the markets at all, so focusing too much on your own self and your EQ while the only thing for me that matters is the market and the edge itself, studying it to such extent until it's dead obvious how you should approach and trade it, and then it's just a thing of practice past that point.
Thanks bro. I think its important not to associate with being clever (or too much this/that of anything really). Lowers hunger for improvement. Think you're the dog's bollocks and you're probably not going to put in the work. Plus you'll probably feel like shit if your situation ever changes. Shoutouts to the Stoics.
I think IQ is not that important in trading honestly. Mostly IQ is just rationalising/justifying based on EQ.
And in terms of raw knowledge, we could probably teach a friend our strategies in a short amount of time but because the IQ gets filtered through the EQ first, they won't be able to execute it.
As you say people can get in their own way overthinking things so maybe a gift and a curse — people think it must be great to be Elon Musk but when asked on the subject he always says something like ~"it's not actually as great as you'd think" cus he's literally overwhelmed with "amazing" thoughts/ideas all the time and can't find the off switch.
For me personally, I know that by understanding something to a deep level, it unlocks a level of CONFIDENCE to actually act on that knowledge and without that confidence, I can be hesitant, fearful, whatever, and that brings about certain problems. Maybe others get that confidence from other means. That's life and trading.
I do think in theory that IQ could make your potential higher in trading though, at least marginally, maybe more. e.g. if you've made an effort to learn how to systematically improve things, problem solve, evaluate, optimise, whatever, then put that in a probabilistic context and apply it to your trading then I think you have higher potential than someone who has the same level of work ethic but spends their time in a less efficient way. If you have good habits in your daily life which keep expanding your knowledge-base and experiences, it should make you better equipped when you turn up to trade each day. That in turn should get you to the next level quicker and the whole thing should compound.
Kai wrote: ↑Sat Jun 13, 2020 3:16 pm
You can only analyze your performance up to a certain point, before getting absolutely wrecked by diminishing returns, there's no chance you can maintain world-class peak performance because complacency will make sure of that, if you know your markets inside and out then trading them will get boring and you are almost guaranteed complacency. It's more than enough to operate on a reasonably higher level with a good enough edge, so if you ask me it's worth taking the time to develop one.
Agree complacency can be a big one. Think it's about being self-aware, habitually checking in, and regularly looking for ways to expand.
No point freestyling it from scratch specific to trading. Better to find a relevant real-world example and then come back to trading.
If we look at nature, stuff typically grows as optimally as it can by default thanks to previous evolution. And yet it still has to interact with an external environment and adjust accordingly. If you block the sunlight needed for growth of a plant or build a house next to somethings roots, it's going to adjust and in ridiculously efficient ways. But it's always based on information, some sort of self-check needs to be done and only then based on the available information can an adjustment be made. Sometimes the plant will even not have a solution because there isn't one and it'll just die. In such a case, a new seed should be planted.
For trading this is things like regular performance reviews, updating your stats to reflect recent markets, report cards, anything which provides useful feedback (information).
If you backtrack in one area without realising (internal mistake), or get knocked back by something externally e.g. mkt conditions changing, at least you've made some progress in another area. Many plants will spread out evenly then once they have figured out optimal growing conditions they'll continue with that until something changes. It's our job as traders to define what that is based on the available information. If we're ignorant to the information, then how are we going to adjust appropriately? If we don't know what's expected drawdown for our system, how are we going to know when we've past it?
Typically humans estimate their abilities based on KNOWN information, and the reality is their estimations are wildly inaccurate because the known information is usually a fraction of the pie; there's pieces of information they haven't come across, some contributing variable in play that they aren't aware of, whatever it is. Everyone will be different but most traders who think they're running at maximum efficiency probably aren't. That said it's completely unrealistic to think you'll reach maximum efficiency and you really don't need to, pretty efficient will do. As such I think it makes more sense to reach that level of decent efficiency with our strategy / market type / whatever and then "plant a new seed", do the same there, and repeat.
If you're already operating at maximum efficiency and making adjustments would be counterproductive (or you're happy with current results), you can still do things like assign time to exploring new opportunities. That's like planting a new seed — although admittedly they need nutrition to grow (resources/time/energy), but you can choose an appropriate plant family based on how much of those you're committed to investing. No point planting a redwood if you're not going to make arrangements to have it watered for the next
few centuries.
Goes without saying that they're not all going to work out. Definitely a risk/reward at play. You might plant some in a shitty spot unknowingly or some contractor might come along and plant a complex over you rendering your new seeds useless. But that can happen to your existing plants, too. If you think about it, a plant is pre-empting potential problems from the get-go when growing in all directions. Be like the plant. Diversify in anticipation.
Example from my trading: When all the UK sporting events stopped from covid-19 my daily process was interrupted. As a result I stumbled upon Esports markets and noticed a game I have experience in had decent liquidity where in previous years it never has. I decided how much resources I'd commit to it (learned about API, reached out to other traders, experimented in mkts, etc.) ...quickly realised I had good edge there and eventually produced what is still my biggest individual market result so far this year. It shouldn't have taken a global outbreak for me to identify that those markets were at least an option but now I know there's value in spending time looking to diversify. It doesn't even necessarily even need to be in the trading realm, just commit a small portion of resources to exploring what else is out there and habitualise it and you should be statistically expected to hit something which yields a great amount for that small portion of resources eventually.
...The plant analogy is good for adjusting to changes in external environment but sometimes we make mistakes on our end too (loads if you're me). A good practice I started doing (it's helped me significantly on 2 occasions now) which could help some people out there, useful for when you find yourself having taken a step or two backwards, is creating "checkpoints" in your journal. Whenever I think I've made a good jump in progress I'll make sure to write down what I thought the key aspects of that were, emphasising on things that are in my control such as ways of thinking, daily habits/routines at that time, some mechanical stuff too such as trading plan rules at that time, strategies I was running etc. Stuey mentioned about wider financial position having an impact on his results and that was a big one for me too, this is all good stuff to include in your checkpoint.
Naturally it's no guarantee you'll be able to come back and recreate the earlier performance of a checkpoint but doing a now vs. then comparison gets you off to a good start with any troubleshooting. Should be ahead of the person who adjusts blindly and certainly the person who tells themselves "it's probably just seasonal" and wastes a few more weeks before they start trying to identify what's caused the change in results.
We need to first make sure any changes in our results aren't as a result of internal changes before we even consider the external. And I think the checkpoint helps you do that.