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I Like My Information Sliced Thin

InvestorEducation / Learn to Trade Sep 18, 2009 - 07:33 AM GMT

By: Charles_Maley


Painting can’t be taught, only found – PICASSO

I was watching the New England Patriot/Buffalo Bills game last night, and it dawned on me just how good professional football players are at adapting to unforeseen changes to their game plan. When necessary, professionals (in any game) will act out of instinct without hesitation. They know it’s crucial to trust yourself when your game plan is threatened, otherwise no decisions are made.

Sigmund Freud said the unconscious mind is usually associated with secondary activity in the brain. We tend to carry out things in the unconscious that we decided to do in the conscious.

There is another form of the unconscious however, called “the adaptive unconscious.” This mental process acts in a primary fashion, influencing our judgment and decisions, and explains good intuitions and instincts. Also, the adaptive unconscious acts a lot faster and without as much effort, like a big computer.

These feelings are natural and should not be second guessed or ignored. After all, they are based on the culmination of all our experiences, just like data stored in a computer. Yet somehow we tend to think they are not as valuable as quantitative analysis. The gut feel and snap decision are just not taken seriously in the decision making world. In fact, we unconsciously make things up to substantiate our behavior in a more scientific fashion.

Malcolm Gladwell, in his book Blink, illustrates this “introspection illusion” with a rather amusing example. When interviewed as to how he became perhaps the best hitter of all time, Ted Williams was more than happy to share.

Ted explained how he would look the ball onto the bat, that he could track the ball until it made contact. Now, even though Ted said this with complete confidence, he’s just plain wrong. In the final feet that a baseball comes at a player, it is too close and fast to see at all. The player is effectively blind.

When confronted with the study that proved a human can’t track the ball onto the bat, Ted responded by saying “Well, I guess it just seemed like I could do that.” Like Picasso said, Ted could not teach how, but he certainly found how, to hit a baseball.
Gladwell reveals in his book Blink, that “great decision makers aren’t those who process the most information, or spend the most time deliberating, but those that have perfected the art of “thin slicing”- filtering the very few factors that matter from an overwhelming number of variables”.

I think we love to explain things that really have no explanation. It lends more credibility to whatever it is we have done. It makes us appear less lucky. Sometimes however, we just can do things, and this should be given equal weight to any formal analysis. Do your homework and have a game plan, but trust your intuitions.

Charles Maley Visit my blog!

Charles has been in the financial arena since 1980. Charles is a Partner of Angus Jackson Partners, Inc. where he is currently building a track record trading the concepts that has taken thirty years to learn. He uses multiple trading systems to trade over 65 markets with multiple risk management strategies. More importantly he manages the programs in the “Real World”, adjusting for the surprises of inevitable change and random events. Charles keeps a Blog on the concepts, observations, and intuitions that can help all traders become better traders.

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