Mindfullness, from Jim Sogi

August 22, 2010 |

 It's rather startling to realize how much of the time we stumble about completely unaware of what we are doing, moving on autopilot. A simple example of this is if some asks you to tell them what color your wife's dress is without looking. Or more commonly, finding your keys after you've put them somewhere and can't find them. As you try recreate the minutes the realization hits that you were totally unaware of what happened as you went through your motions.

One of the most difficult tasks is determining where the market is. Is it high, is it low, where is it going, what is it doing. We watch, but are we aware of what it is doing? Do we overlay our preconceptions on it. Are we mindful of its movements and what they mean? Are we looking at the current situation or trying to pigeon hole the market into our prior experience?

In Eastern transcendental philosophy one of the main concepts is mindfulness. It is an awareness of current actions and avoiding the trap of autopilot while the mental tape runs blinding us to what is going on. It would be good to apply this to the market before entering a trade and during. During a trade bias and emotions can overwhelm a calm observant mien. The conflict between prior expectation and current action is not easy to resolve during the fray.

Another interesting thing is the ability of the human mind to comprehend complexity and perform at high levels based on experience and intuition. Playing catch with a baseball is a good example of complex things done naturally. I am sure there are great traders who trade on instinct and do well. Can they beat a rigorous systematic approach. Probably not consistently because of the fallibility of the human condition prevents continuous high level performance. How about a combination of systematic analysis and discretionary trading. Will that beat systematics?

I've argued this with list members who concede that even systems are tweaked in a discretionary manner blurring the line. Their argument says that "discretion" is really just an unstated system that may or may not work better. The human mind can observe changes in cycles faster than a lookback system and also incorporate qualitative input. The human weakness is sadly the stumbling block.





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