Trading and Psychophysics

[Arthur Deco]

Nearly four decades ago I was a minor professional expert in psychophysics of the visual kind. So I bring to trading an acute awareness of the ways in which perception can limit one's maturation as a trader. This issue is underaddressed on ET IMO, with the exception of a few dialogues (nay, diatribes) between Jack and myself. So with the forbearance of moderation I will share with you my own views on the subject and some recent ear-opening experiences.

Those of you with at least a passing knowledge of Neuro-Linguistic Programmming (NLP) will recognize the idea that individuals tend to process environmental data preferentially. One may be primarily visual ("I can see what you're saying"), but be deaf to verbal nuances. Another may preference auditory processing ("Talk to me about this picture"), and be blind to visual subtleties. Yet a third may relate to the world primarily kinesthetically ("I don't feel good about this"), and be deaf and blind to the nuances of other senses.

Pit trading presumably provides inputs for all three perceptual types (and perhaps for the rare olfactory type as well), but solitary electronic trading tends to isolate one to visual inputs only. My rubric is the perceptual deprivation this causes, and the solution I have found for myself.

I shall elucidate if the thread survives moderation and elicits any intelligent responses.

 

[infolode]

Looking forward to this thread and forthcoming discussions. I hope it won't be destroyed by the usual detractors.

 

[Arthur Deco]

Thank you kindly. I am confident that at least sixteen of the usual detractors will not interfere. I will draw from my memory of Jack's early SCT posts here for examples of the visual approach to trading, as a prime example of the the ways in which auditory processing can lighten the perceptual load. This will in no way be an attack on SCT, rather the contrary, because it is highly exemplary of a visually complex trading system which could benefit from auditory processing. I also believe that even Spydertrader's SCT-lite, or any other complex system used here, would benefit as well.

 

[Spydertrader]

Quote from Arthur Deco:

My rubric is the perceptual deprivation this causes, and the solution I have found for myself.

For many years, I added audio alerts to Equities Trading in order to 'draw my attention' to a particular chart which had reached a certain threshold. Thinking back, I ranked the input (auditory first, visual second) in an effort to avoid information overload. One could program similar auditory inputs into one's trading system as the market 'approached' threshold. Once triggered, these auditory alerts could then signal the need for closer visual inspection. Such a combination of audio and visual stimuli might assist the trader in 'sorting out' the sequences required of a profitable trade. Different 'whistles and bells' could represent different types of signals as well. By using a combination of audio and visual stimuli, one avoids information overload by sending the required information through different 'pipes' (so to speak) - leaving more 'room' for processing.

Looking forward to your discussion.

- Spydertrader

 

[doli]

Hi, Arthur

I am new to psychophysics.
Does that field include size of the chart?
I have noticed that it is a good idea to have charts with a lot of room. What I mean by that is that you don't want to be faked-out into thinking that a top/bottom is in just because price is currently at the top/bottom of your chart's price axis. If this is a psychophysics problem, I have found a solution: run a chart with more data than just today's intraday data. Some may have the luxury of scaling their chart's along the price axis. Those auto-scaling chart's (like IB's) are The Devil's own work. Does any of that make sense?

 

[Arthur Deco]

Thank you for sharing your experiences. Let me offer an explanation which is highly personal, but which may resonate with others. My education started early in a technical direction, and culminated at university in many courses requiring elaborate visualization capability: three dimensional geometry, drafting for machining, fluid flow, mechanical structures, complex servomechanisms, and the like. I came to think of myself as a visual person. In later years, I came to realize that that was not true at all. Even minor auditory inputs fatally disrupt my concentration. Classical (especially baroque) music facilitates it. I verbalize everything in my head. I am acutely aware of nuances of psychologically revelatory intonation in speech. I even make visual constructions from mental verbal direction. I ultimately realized that I had trained myself to have visaul capability to succeed in technical studies.

Now remember how you came to trading. Probably your first experience was of charts in classic texts, price only, or price and volume. All those always seemed to me to be perfectly understandable, even inevitable. Price peaks. Price troughs. What could be simpler? The real-time reality is quite different as we all know. Not all peaks and troughs follow through. In fact, it is as trivially easy to find peaks and troughs in code as it is visually, less that fifty lines of code suffice. It is equally easy to show that trading all peaks and troughs has negative expectancy. So how to determine the likelihood of follow-through? That quest leads us to enormous visual complexity.

 

[Arthur Deco]

Doli, those are very astute observations. That is why I trade with the largest monitor solid angular subtense I can absorb without excessive eye and head motion. What you said also relates to the necessity for solid situational awareness of the shape of the full day and of the month past.

 

[Janed]

Quote from Arthur Deco:


solitary electronic trading tends to isolate one to visual inputs only.

When you slide that mouse around on the chart that may be both tactal input and tactal output, whether you realize it or not. Don't overreach!

 

[Joab]

Quote from Arthur Deco:



Those of you with at least a passing knowledge of Neuro-Linguistic Programmming (NLP) will recognize the idea that individuals tend to process environmental data preferentially. One may be primarily visual ("I can see what you're saying"), but be deaf to verbal nuances. Another may preference auditory processing ("Talk to me about this picture"), and be blind to visual subtleties. Yet a third may relate to the world primarily kinesthetically ("I don't feel good about this"), and be deaf and blind to the nuances of other senses.

Hogwash !!!

This is a myth and although it may be true that we have a lead modality we use all of them regularly.

As a master nlp trainer and years of study, NLP as a generalization is probably only good for helping with phobias at best.

Read the Bible if you wish to master your life.

 

[sumosam]

I think there is something to be gained from hand charting, although I admit I have not started doing so. I also think one begins to get a feel for the markets, almost like listening to a heartbeat...or perhaps, a greater intutive sense develops.