May

3

The fitbit--a popular self tracking toolThere is a very interesting article in the NY Times Magazine on quantifying how one's life is spent. Perhaps some nuggets in there applicable to trading:

Humans make errors. We make errors of fact and errors of judgment. We have blind spots in our field of vision and gaps in our stream of attention. Sometimes we can’t even answer the simplest questions. Where was I last week at this time? How long have I had this pain in my knee? How much money do I typically spend in a day? These weaknesses put us at a disadvantage. We make decisions with partial information. We are forced to steer by guesswork. We go with our gut.

That is, some of us do. Others use data. A timer running on Robin Barooah’s computer tells him that he has been living in the United States for 8 years, 2 months and 10 days. At various times in his life, Barooah — a 38-year-old self-employed software designer from England who now lives in Oakland, Calif. — has also made careful records of his work, his sleep and his diet.

A few months ago, Barooah began to wean himself from coffee. His method was precise. He made a large cup of coffee and removed 20 milliliters weekly. This went on for more than four months, until barely a sip remained in the cup. He drank it and called himself cured. Unlike his previous attempts to quit, this time there were no headaches, no extreme cravings. Still, he was tempted, and on Oct. 12 last year, while distracted at his desk, he told himself that he could probably concentrate better if he had a cup. Coffee may have been bad for his health, he thought, but perhaps it was good for his concentration.

Barooah wasn’t about to try to answer a question like this with guesswork. He had a good data set that showed how many minutes he spent each day in focused work. With this, he could do an objective analysis. Barooah made a chart with dates on the bottom and his work time along the side. Running down the middle was a big black line labeled “Stopped drinking coffee.” On the left side of the line, low spikes and narrow columns. On the right side, high spikes and thick columns. The data had delivered their verdict, and coffee lost.

Riz Din comments:

Interesting article. I've tried a few tracking experiments such as strict calorie counting, but it gets really obsessive because it is such an active process (I carried a little pen and pad around with me for a month). At present, logging activities such as time spent doing activity x, foods eaten, exercise taken, etc, has a strong reflexive element as the act of measuring interferes with the normal course of affairs. Even tracking tools on smart phones require a manual input element, which will distort affairs and can burden (as well as enlighten) the mind in many ways. On the upside, this is all great when you are striving to achieve a set goal over a short period of time, just less so when you are just getting on with life and want feedback on yourself. Because of this, I think data driven living will really take off when the data is collected passively and can then be reviewed periodically. I can imagine, for example, a technologically wired up house filled with sensors that silently logs your whereabouts and activities and produces a monthly report.

My favorite realizations from tracking exercises are that I tend to overweight recent experiences, and also that I am often caught in repetitious cycles. Another key benefit is that list keeping/tracking serves as a kind of photo album of memories: I've kept a booklist (in Google Docs) of all books read over the past five years or so, with a simple five star rating system, and by filtering to see my favorites I am able to see what type of person I was and the type of person I may be becoming. All very interesting.

Russ Herrold writes:

Here is an interesting read for those interested in a life ruled by numbers:

"Ubiquitous self-tracking is a dream of engineers. For all their expertise at figuring out how things work, technical people are often painfully aware how much of human behavior is a mystery. …"

This is not specifically applied to numercially driven trading or investing, but the emphasis on accurate and contemporaneously generated records mentioned in the latter pages of the article resonate with what our aspirational selves may seek to attain in the financial markets:

- trade from numerically validated setups ['Past results may not be indicative of future results' vs. 'History does not repeat, but it sure does rhyme a lot']

- do post-analysis on what worked, and when a plan was followed, and when it was not ['If you cannot put a number on it, it is an opinion, not science']

- Kelly criteria for binomial trades; Optimal-F for N-way position sizing; with the known problem of non-Normality of financial markets 


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