Quote from CharlesTrader:
I think that it does apply to trading. (The notion that our first "read" of a situation is the more accurate one).
I know from experience that if the market trades a certain statistic distance from the open price, that the probability of reaching the Average Daily Range or Average True Range level substantially increases. However, I still have a tendency to convince myself that there is no way that the market can reach these levels. However, on average, the first read is the correct one.
Charles
Hi Charles--
Curiously enough, there is a book coming out on this very subject titled "Blink" by Malcolm Gladwell, author of the book, "The Tipping Point". Some excerpts from the article I saw:
It Pays to Trust Your Gut
By Daniel Terdiman |
02:00 AM Jan. 07, 2005 PT
If the premise of "Blink" has any merit, then by the time you're reading this sentence, you've likely already made some snap judgments about this story. Perhaps that's because you read the author's previous book, the best-selling Tipping Point, or enjoyed his many magazine articles or even have feelings about stories written by the writer of this review.
In Blink ($26, Little, Brown), author Malcolm Gladwell makes the argument that people frequently make some of their best decisions in mere seconds. We think without thinking, sizing up situations and determining how we feel about someone or something based not on voluminous new information, but rather on our accumulated experiences. And, Gladwell says, that's a good thing.
Blink is rife with wonderful anecdotes of what Gladwell, a staff writer at The New Yorker, calls "thin-slicing." That is, people reacting to the barest of new information and arriving at smart decisions others with more information couldn't make.
Gladwell's thesis, written in an easy, flowing, confident prose, is that more information is not necessarily better, even though society is primed to believe careful thought is always preferable.
"We live in a world that assumes that the quality of a decision is directly related to the time and effort that went into making it," he writes. "
Gladwell argues powerfully that, in fact, thin-slicing is precisely the kind of thinking that, evolutionarily speaking, has kept us alive.
"When you walk out into the street and suddenly realize that a truck is bearing down on you, do you have time to think through all your options? Of course not," he posits. "The only way that human beings could ever have survived as a species for as long as we have is that we've developed another kind of decision-making apparatus that's capable of making very quick judgments based on very little information."
In the end, that's Gladwell's point: People make instant decisions, and it is possible to learn how to make them good ones. He's not saying that snap judgments are always good. Instead, he says, when they are backed by experience and knowledge, they can be good."
Best,
Larry Phillips
