Can anyone reflect on taking college psychology or behavioral finance for trading?

[TraderGreg]

Quote from stefan_777:

Don't run away now, you've said philosophy doesn't provide conclusions, then where do I find conclusions?
After what has been said here, the answer to that is pretty grim, unless of course it involves something like 2+2=4. But conclusions relevant to real life? I don't think so.
[/B]

I think we're actually agreeing on many things. I wrote an essay on the subject, actually.

I think that, within the mind, true knowledge is unattainable, so no there are no real conclusions outside maybe math.

I think (very brief summary of my essay) that there are three levels of knowledge: those with personal solid evidence, those without, and the unkown.

As no conclusion can be made for true knowledge, than knowledge with personal evidence can only be deemed more likely (with openness to being wrong).

Without personal evidence would include things like Mars is farther from the Sun, which I'm guessing most ordinary people have not personally proven, as well as all knowledge told to you.

The vast majority of those lacking evidence must be accepted for the sake of usefulness, but not concluded as truths.

Anyway, my point with philosophy was that there is no knowledge or solid base within any theory, so it is the unknown and cannot be accepted into any belief.

Things that would be "accepted" would be things that would pass the scientific definition of theory: constantly tested without proven wrong, simple as possible, capable of prediction, all that.

 

[Cutten]

Quote from stefan_777:

No one ever lost money if they fully believed Hume, because they would be too skeptical to even pull the trigger, since predictions are dependent on unnecessary assumptions, which are only habitual conventions of belief that have no grounding in reality according to Hume. If one believed Hume, there wouldn't be any human agency (will) capable of making decisions, because if all we have is our perceptions (according to Hume) and even our ideas can be reduced to our perceptions, since perceptions cannot act or make decisions for us, we could not possibly have the free will to press buttons and make trading decisions. This is the reason why I think empiricism is a useless paradigm for traders, or anybody who rightfully believes they're capable of free will.

Take a look at Descartes Meditations to see the disconnect between perceptions and reality, then check out Hume's Treatise of Human Nature for his arguments against our (apparently speculative and unreliable) notions of causality.
Then read Kant's Prolegomena for the whole tl;dr of it all, and if you want a way out of Hume's skepticism.

I guess you didn't read my prior post. I disagree with almost all the (gigantic) assumptions you've made here.

 

[Cutten]

Quote from stefan_777:

Hume would say you wouldn't even know if induction could apply to any statement. It would then be foolish to make any scientific claims. I think you're missing his point.

If you accept Hume, you have to accept that people cannot induce with certainty from their perceptions. If we do induce from our perceptions, we're making the fallacy of affirming the consequent.

Ok, you read my post but just didn't understand it.

The truth of a conditional statement is not affected by whether the conditional is true or false. For example "If Russia had a population of 2 people in 1939, it would have been defeated by Nazi Germany" is true, despite the fact that in 1939 Russia did not have a population of 2 people and was not defeated by Nazi Germany.

Equally, the statement "If induction applies, then exploding a nuclear device in New York will kill lots of people" is true, regardless of whether induction is true or false.

From a pragmatic point of view, it is impossible to know if induction is true or false. If it is true, then relying on it makes sense. If it is false, and the future is entirely chaotic and unpredictable, then relying on it is no worse than the alternatives. Therefore, the pragmatic course of action is to rely on it, since your outcome will be either equal or vastly superior to not relying on it. Hence, people who accept Hume's points can still behave as though induction were true, as Hume himself did.

 

[Cutten]

Quote from stefan_777:



Hume is picking on what science does all the time, which is affirming the consequent:

Hypothesis ------> Observation
Affirm Observation
__________________
Therefore Hypothesis is correct

In my opinion, and that of many if not most intelligent scientists, science does not do that at all. Whilst many ignorant scientISTS may think like this, and most non-scientists think this, no trained philosopher of science, or practising scientist aware of such issues, believes this.

As an example, take the major scientific theories of the late 17th and early 18th century. Apart from logical proofs in mathematics, *every single major theory* from that era has since been proven false. The history of science is one where ALL non-tautological scientific theories are eventually refuted. Saying that science attempts to prove hypotheses correct thus flies in the face of both logic and the historical record.

If the past is any guide, then it is almost certain that the vast majority of current scientific theories will be proven incorrect in some regard in the future.

 

[stefan_777]

You've written three posts bashing this, but you still haven't come up with a solution to Hume's objections of science inducing causal relations that may not exist.

The hypothetical syllogism (if/then statement) you gave for the russians and nazis presupposes a causal relation between the population of the russians and the nazi's defeating them. To find whether the conclusion of "the nazis defeating" them would be true, further premises have to be presented to support the conclusion.

Giving a formal hypothetical syllogism is not sufficient for science, science is trying to find reasons whether those premises would be true, and the presupposed correlation between them to be valid. This requires an inductive argument where multiple premises are brought forward to give strength to the inductive form.

Your If/then statement not a scientific argument, which are inductive by the way. It's a formal argument where the truth or falsity of the premises is independent from the form. In inductive arguments, the logical structure is not perfect, and is only strengthened by extra premises.

The form the hypothetical syllogism is correct, but that's useless if you want to know whether the conclusion is correct, (please note, just because the form is true in a formal argument, it doesn't mean the conclusion is true). Like any formal argument, the logical strength is independent of the soundness (truthfulness) of the argument.

Science concerns itself with the truth or falsity of the premises, and it presupposes causality between premises. That's why it's inductive, and why science is based on inductive reasoning, not formal.

The keyword here is presupposition. Science does it all the time. Hume is attacking the inductive basis of our knowledge, basically leaving us with no certainty in our knowledge. Now science can't fight against Hume because all it has is inductive arguments. It can't use formal arguments for what it claims because the premises of the formal arguments and correlation between them depend on inductive arguments.

Notice what you're doing? In your first conditional statement you just state, "if this, then this". But science goes deeper into that statement and tries to explain the truth or falsity of the statement of "why if this, then why this". Science would be useless and boring if it didn't attempt to prove the truth or falsity of conditional statements. But it can only do this by inducing a causal relation. And we all know what David Hume thinks of that.

I don't necessarily agree with the implications of Hume's philosophy, I don't have to, I'm a philosophy student who studies and exercises many arguments and doctrines impartially. Hume just happens to have useful arguments against people who assume science (or anything for that matter) is the holy grail of knowledge.

 

[stefan_777]

Quote from Cutten:

Saying that science attempts to prove hypotheses correct thus flies in the face of both logic and the historical record.

Science is affirming the consequent because it uses observations to affirm a hypothesis.

I would certainly hope that science is trying to prove hypotheses, they wouldn't be in the business of research if that wasn't the case.

Cutten, did you ever read Descartes, Hume, or Kant?

 

[saliva]

Hey Stefan,

As a Cartesian, I like to think that everything that I see around me is the figment of my own colorful imagination. Even worse, I'm willing to claim that it's the work of some mad genius à la Matrix. But one question that has been nagging me for a while is what capacity do I have to even doubt that assumption?

What sez you?

 

[jack hershey]

Stef 777:

As time passes you may have the opportunity to deal withbeing able to use your mind form an orientation of critical trinking or thinking critically.

There are many historical occurances where people make serious and consequential mistakes because they didn't get straight what to do and how to do it.

One good idea I have run across is to work with others to figure thiungs out.

Currently, you are studying for some reasons of your choosing. You also comment that you have an interest in trading. Most trading is done to make money.

In markets, those who use what you think is going on in the world and what you think are appropriate reasoning processes, do not have long term success. Many people have examined what and how people did what they did and, further, they examined just how the conditions, situations and circumstances unfolded based on the reasoning and planning os such people.

All this factual information forms a good basis for not repeating the past these people provided to those that are now so informed.

I do not believe you will depart from your path to any extent. You will probably not find a reason; how could you? What you do is different from either creating or problem solving.

The class of intellectual considerations that are important are not found in your studines as you outline their focus and scope. Nor are they found in the history of the financila industry that so well documents failure and lack of success.

I am a scientist by training, and I note, and especially with regard to applied science, scientists succeed in outstanding ways by absolutely avoiding the inductive pitfalls. They do not operate in that turf because they know it is not appropriate and is never truly fruitful.

The Scientific Method can be applied to trading (making money) in the markets in several ways. There is a popular way and there is a lesser considered other way.

The popular way is as you describe and others have documented and have documented their brands of remediation for those who use it. A lot of them are famous. I've attached the schematic that is generally accepted.

As you see, the process invloves using money in this application of the Scientific Method. There is a very great chance this is right up your alley.

My training and education causes me to reject this out of hand. As the record shows, not many people do.

 

[stefan_777]

Quote from jack hershey:


In markets, those who use what you think is going on in the world and what you think are appropriate reasoning processes, do not have long term success. Many people have examined what and how people did what they did and, further, they examined just how the conditions, situations and circumstances unfolded based on the reasoning and planning os such people.

Yea, when I'm trading, the last thing I'm thinking about is philosophy. It's actually nice to get away from it for a change, and just act on what I've been inclined to interpret as opportunities. There really isn't any action in philosophy, because thought isn't action.

On the other hand, when I'm doing philosophy, I think about trading all the time.

It's pretty funny from that perspective.

 

[increasenow]

cutting right to it...the "macro" view is simply like looking at a year chart...and then the "micro" is a week or "day"...throw in the various news events and you got it...no need for any philosphy classes at all..