This is an excellent article on deception with many applications to our field where deception is needed at all levels to stay ahead of competition.

Gary Phillips writes: 

We're not only susceptible to being deceived by the narratives of others, but by ourselves as well. We take a linear view that doesn't lend itself to the complex systems described above. We see something happening in the market, and we can't help but create our own narrative to explain what's happening. Traders are very good at linking cause and effect, often incorrectly; thereby unintentionally deceiving themselves.

However, you can't understand a complex system, by simply looking at it's individual parts. There are multiple heterogeneous agents that make independent decisions that evolve over time. These agents will interact which leads to emergence i.e., the whole becomes greater than the sum of the parts. and, emergence will disguise cause and effect. Therefore, it may be difficult to determine if deception would have an effect on the outcome, or not.

In hindsight, it's often the hidden factors that one did not anticipate or even consider, that were the drivers behind a move. So, even a move built on the back of deception or misinformation, may still be an actionable event, if one if one practices good trade management.

Jeff Watson writes: 

I remember back in the pit days when I'd want to shake out some weak hands by trying to fake a rally…..I'd start, then after 5 minutes I'd start believing my own fake out.





Speak your mind

2 Comments so far

  1. Jim Davis on March 4, 2015 1:20 pm

    The problem today is much of the fakeness is hft driven and takes place so quickly that unless you are in the book, it’s too late to capitalize.

  2. bo on March 5, 2015 7:08 pm

    In racquetball i jumped 5 points against the pros with the simple deception of looking at a target the opposite direction that i was hitting. it took about an hour practice to develop. In skid road survival it’s the same, look the other way than you’re going.


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