May

4

 Charles Darwin once wrote, "Each living creature must be looked at as a microcosm — a little universe formed of a host of self-propagating organisms, inconceivably minute and as numerous as the stars in the heaven."

I have taken this quote to heart, especially in my trading. Each individual trading program, like my own, is formed "of a host of self-propagating" variables. Although, I must add, that every trading system is nowhere near as complex as that of a cell, let alone a colony of cells. But trying to find parallelisms in biology and trading seems like a good exercise.

For instance, the foundation of one trading system is to quantify and qualify three basic variables: time series, volume, and price. But found in each of these variables are a slew of possible dependents based on the action of the other dependents, hence making them interdependent. What makes one hedge fund buy 10,000 long contracts of the 30-year t-bond, while another fund is willing to sell them? What about spread trading and how does this affect the overall movement, if the often talked about lobagola is experienced much of the trading days? Is it possible to understand the reasons of such things? Is it even necessary?

In order to understand how the human tongue works it is necessary to delve deep into the inner workings of the tongue. For example, the bumps on the surface of a tongue are called papillae, which control our taste buds. Taste buds provide information about the taste of food being eaten. The human tongue has about 10,000 taste buds, and each of these taste buds is formed of clusters of about fifty cells. Should one want to change, enhance, or get rid of a particular taste bud, the comprehension of the cells that make up the taste bud, and how they interact with each other is probably necessary in order for any manipulation to take place.

Perhaps asking the right questions, as so many on the spec list has stated, is the most important exercise one can do in any field of endeavor. Perhaps I need to start with the absolutes, the unchanging variables, in the field of trading. In a conversation between Albert Einstein and Count Harry Kessler, recorded by the latter, Kessler asked him if relativity applied to atoms. Here is what was recorded in Kessler's journal:

"Einstein said no: size (the minuteness of the atom) comes into it here. So size, measurement, greatness, and smallness, must be an absolute, indeed almost the sole absolute that remains, I said. Einstein confirmed that size is the ultimate factor, the absolute that cannot be got away from. He was surprised that I should have hit on this idea, for it is the deepest mystery of physics, the in-explicability and absoluteness of size. Every atom of iron has precisely the same magnitude as any other atom of iron, no matter where in the universe it may be. Nature knows only atoms, whether of iron or hydrogen, of equal size, though human intelligence can imagine atoms of varying magnitude."

So, what are the absolutes of trading? In this highly competitive endeavor, due to my lack of knowledge and experience, I have found very few absolutes. If one or two constants can be properly qualified does this provide a sound foundation to entering/exiting positions, while taking into consideration the law of ever-changing cycles?


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