Hi rlb21079 and thanks for the response. You bring up some very interesting points, and I'd like to 'think out loud' about a few of them here. I want to emphasize that what is to follow, in keeping with the original spirit of this thread, is primarily for the consideration of the beginning trader - experienced traders and poker players are encouraged to comment in order to help the beginners out.
What I want to say first is IN NO WAY an attempt at refuting the points you make - it's just a clarification. When I was speaking about emotion, I should have made it clearer that I was referring MAINLY to the emotions one experiences after a big loss (or a big win, for that matter). How do we allow that emotional state to affect our subsequent trading or playing decisions? It's the 'tilt factor' that interests me in this situation, since, although I fancy myself a pretty objective, disciplined guy, I have watched myself go on tilt and later asked myself 'What in the heck were you doing there, anyway?'.
But much more interesting is the general question you raise about the involvement of 'non-logical' or non-rational' information in our decisions. Are emotions always the enemy? I have of course had that 'gut feeling' experience when playing poker - and although I haven't kept the stats you have, I suspect that the majority of outcomes which were influenced by these feelings end up in my favour! As a musician by trade, I am used to going with my intuition in improvisational situations. And certainly, I feel that there is more than a little intuition involved in trading, whether one is studying charts for swing trading time frames or reading tape for very short term scalping situations. One old saw that I heard when I was starting my research was 'never average down'. This seemed clear enough to me - but then I read an interview with a money manager of 25 years standing who said that he will average down if it 'seems like the right thing to do at the time'!! A clearly intuitive decision as opposed to a purely logical one. In every trading book I have ever read, I hear the pro's saying things like 'I just had a feeling that the Canadian dollar was going up' or "IBM was looking weak so I shorted it". Now, chart reading can be a pretty subjective exercise - otherwise, everyone would be making money, right?
The hard right edge looks different to me than it does to you - all those buyers and sellers prove it. What exactly is meant by 'looking weak'? What does the poker pro mean when he says "I saw something in my opponents eyes that made me call his all-in"? Surely this kind of information is as important as the volume and price data
So how do I come to believe that one should 'trade like an automaton'? Well... I guess in the end, I don't!! The only situation in which this may be advisable might be that in which _beginning_ traders find themselves. I guess I might be willing to at least attempt to defend an argument which goes something like this - 'For the first 6 months, make your decisions according to a strict plan - take emotion completely out of the equation, but _make a log of those situations in which you have a strongly intuitive or gut feeling about something_. Then after a certain period, see how you would have done with your gut calls as opposed to going with the automaton approach.
In trading and in poker, should one build up a body of experience, gained using a strictly rational approach, before making the gradual shift towards a 'hybrid' method of decision making?
In doing my research into trading, I have heard so many times that the number 1 consideration is money management and risk control. Of course, this is most important in losing rather than winning situations. What do you do when a position goes the wrong way? You have a capital base of $25,000, so you will risk no more than 2% of that capital on any one trade. You buy 100 shares of XYZ at $50.00. It goes up to 51.00 the next day, and the day after that it opens at $51.60 and you are feeling good about life. Then you go to the golf course and dream about the day you will play Pebble Beach for the first time, and then you get home and check the quote and it is at $44.75, and there are 20 minutes left in the trading day. What do you do? The seasoned veteran may be able to draw on a lot of non-rational, intuitive cues in making a decision because he has seen this kind of thing happen so many times that he can distinguish between crises that are really just tempests in teapots and those that can lead to disaster. For the beginner, though, is it advisable to close this trade out immediately, regardless of what one thinks may or may not happen? For the beginning Hold-Em player, is it always advisable to fold 99 in EP until one has the ability to read a table well enough to recognize situations in which you can be almost sure that you can outplay your opponents over a 3 hour session, no matter what their cards?
So now you know the true meaning of 'long-winded'
In the end, I am certain you're right when you say that there comes a time when " there... exists something in addition to raw logical and automated decision-making".
rlb, please do respond, and thanks a lot for posting your thought-provoking comments here. Hopefully some others will join the discussion.
