Quote from tobbe:
Good post, xspurt. Unfortunately, Marketsurfer won't read it since he has you on ignore (and he won't see this as he has me on ignore, too). Assuming they are coded, I think the PD's are a prime example of AI at work (artificial ignorance).
And to not derail this thread further - MAESTRO did kindly ask us to stay on topic --
1) Amplifying intuition is one thing, knowing it's something worth of amplifying is another. How do you handle that?
2) In what way are the IAs different from a fancy chart indicator (apart from there being no chart)? The way they are described they are not really fuzzy at all and you could hook up a trading platform and have it "go long when it's more blue than red and no yellow tint" and then backtest it all... or not?
Maybe we really need IDs instead (Intuition Dampeners) as suggested by NoDoji and Cornix... I know I don't have any working intuition at all, but I still have problems following even the simplest mechanical rules because somehow some part of me thinks I do.
Great questions! I love when people think smart!
1) Amplifying intuition is one thing, knowing it's something worth of amplifying is another. How do you handle that?
Letâs take a look at driving. Experienced drivers have instant reflexes when they hit a patch of ice on the road. They automatically turn the steering wheel into the right direction to avoid the âspinningâ effect; they do not apply breaks, instead they use their engine to slow down the motion etc. They intuitively know what to do in order to avoid the crash. Is it something worth amplifying? Yes, the skill of accident avoidance is a very useful skill and developing the intuition that helps you in those situations is extremely useful.
I used to train jet fighter pilots. To them split millisecond decisions are the way to either live or die. They can use all the training they can get and all the skills and intuition they can obtain via developing their abilities to read the gauges of the cockpit. All the subtle signs of the combat situations that might change the odds in their favor are worth having!
So, how do we amplify their intuition? We develop the new breed of sensors, gadgets, gauges and other visual information enhancement devices to help them to be more efficient in obtaining those skills and developing better intuition towards the right decisions when logical thinking simply isnât going to help!
So, I guess it explains what is worth amplifying in any type of dynamic decision making - it is the ability to efficiently process increasingly larger amount of critical information in less time. It is also an ability to make more productive decisions based on that information and ultimately increase the likelihood of winning the game.
2) In what way are the IAs different from a fancy chart indicator (apart from there being no chart)? The way they are described they are not really fuzzy at all and you could hook up a trading platform and have it "go long when it's more blue than red and no yellow tint" and then backtest it all... or not?
It is not about whether this particular gauge is a form of a chart or not. Ultimately, any graphical information on your computer display could be perceived as a chart of some sort. The difference is that it is not intended to use logic, i.e. âIf-Thenâ type of the decision making at all. It is not designed to trigger the thinking such as âIf the color is blue Then go Longâ but rather to create the feeling of âstrongerâ or âweakerâ bullish or âbearishâ sentiments that might affect your decisions to Buy or Sell. Also, the price chart and all the possible indicators that could be put on it are limited in their abilities to present large variety of crucial information.
For example, the âSentiment Spectrumâ is created by processing lots of parameters taken from the Bid/Ask dynamics on the order book such as order flow rate, size fluctuations, filled orders volume etc. If I try to put all this information into a traditional price/time chart (of course, it is possible to do) it would not increase, but significantly reduce an operatorâs ability to make rational decisions. It is not then an amplifier of intuition but rather an âInhibitorâ of it.
In order to illustrate even more please consider the piano as a musical instrument. Think of a chart as the succession of the notes on the note paper that represents music. Now do you see the difference between looking at the notes and playing the music? Do you also see the difference between painting and painting by numbers?
Any device, chart, visual aid, gauge etc. that increases your ability to efficiently process the feedback from your actions and deliver more efficient means of comprehending complex situations is the Intuition Amplifier. However, the science of what makes the information representation is more efficient and what reduces our abilities to comprehend it in real time is not trivial. It is not simply a matter of dumping all that we can measure on the chart and write the logic to âback testâ it. It is not even in the same category. Most of my IA tools cannot even be tested on the historical data because they are based on commonly observed subjective reactions of individuals. The efficiency of the IAs is mostly based on the efficiency of the behavioural, cognitive and mathematical psychology models they use and not on âcurve fittingâ historical price data processing.
I hope I shed a bit more light on it. I will continue to discuss the science of IAs more in the upcoming posts. I hope the subject will be more clear when I present more of the IA examples and how they are used in active trading.
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It is as close to Grail as it gets.