Sep

1

Speculation is a very consuming endeavor that involves all the senses and extends to the imagination. You often hear these statements uttered by traders:

As you can see these statements all involve the senses, the reflex and the imagination. One should normally find it beneficial for speculators to sharpen their senses and reflexes to pursue this potentially profitable but ever consuming game of speculation.

For example, you can listen to a flawed piece of music and try to spot which note is out of tune. You can also just play an instrument (more time consuming) to develop your hearing and imagination. You can develop your reflexes by playing a quick sport like Hockey or squash.

One endeavor I would like to talk about and that I trust no one has touched upon before is Photography. During the last three months, I spent most of my waking hours trying to sharpen my photography skills. Why photography? Photography is the process of making pictures by means of the action of light. Light patterns reflected or emitted from objects are recorded onto a sensitive medium or storage chip through a timed exposure. The process is done through mechanical, chemical or digital devices known as cameras. To catch that perfect photo, you need a good tool (camera), skills, good reflex and most importantly the imagination/vision and the sight to spot that perfect frame in the first place. Photography also involves treachery and deception. For instance, You want the viewer to focus on a certain subject in your photo. In that case, you put the subject in focus and blur the background (known as shallow depth of field). While the camera took a photo of a certain frame, the photographer used his skills to ensure that the viewer is focusing on one subject and ignoring all else.

Notice how in this picture the butterfly and the flower are in focus but the background is all blurred? You do that by using a wider aperture (lens opening) Other techniques involving moving subjects where you want to give the viewer the impression that a car is moving for instance is called panning. In this case you move your camera in the same direction as the moving subject for the effects.

While in photography the deceptions (a.k.a. art) are very well defined, It is not as cut and dry in markets. Let us start a discussion on deception in markets and how the markets want you to "focus" on a certain subject while ignoring the blurred background. What are the tools (aperture) the market uses to make you focus in the wrong direction.

Vic and Laurel started with the news, propaganda and the other doomsday scenarios including wars, bankruptcies, SARS, etc. that make you pay attention to a subject in focus (the news) and forget all about the blurred background (the markets' general upward drift) to your detriment. I will offer another (more micro) deceptive tool — it is the bid and ask size. Amateur traders pay attention to the size of the offer and bid which are insignificant most of the time but the big carnivores of the markets use them to "wrong foot" the naive into selling when the should be buying and vice versa.


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