Feb

20

 In Staying Alive in Avalanche Terrain, Bruce Tremper describes safety protocols for avoiding disaster in avalanche areas, describes the basics of snow science, weather and equipment. Of interest for speculators is the decision-making section. Curiously, he compares the process to stock trading, and describes the best method as a Bayesian iteration of information gathering and probability functions. He discusses human heuristics similar to the backcountry skiing book. He discusses the use of decision making aids such as checklists, and decision tree cards, or flow charts.

In the backcountry there are many variables which he narrows down to three basic: terrain, snow, weather. He tries to simplify the decision making process to a matrix of three or four relative conditions such as low, moderate, considerable, high, extreme, against three variables. A go-no go matrix results. This might be a good way for a speculator to gauge trade entry as opposed to a 25 point check list that often gets overlooked in the heat of battle. This can be on a card visible at the workstation. Both entry and leverage might be computed on such a system.

One of the basic methods for determining the safety of the snow pack is to dig a pit and examine the layers. Some layers are weak and are prone to causing avalanches. Another area to concentrate in terrain are steep rollovers where the slope angle changes. My analogy to trading is that the trader should examine the quantitative make up of the the season or cycles actual trades. This is more than just looking at a chart. There are chart methods though that take their cue from avalanche analysis. Sharpe direction changes often show stress areas in the market and seem to affect subsequent price action. Further quantitative analysis of these areas may reveal interesting and helpful data. This may be used to update your prior probability analysis as the day progresses.


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