examining the use of the slope of the 30 day regression line for understanding intermediate term trends in context
Who am I as an adult learner:
I am framing the answer within the context of my “Big 5” (Strelecky, 2007). The “Big 5” focus my thoughts about self, purpose, mission and values. In Strelecky’s work, the Big 5 are 5 things you want to accomplish in your life. My “Big 5” are all states of being, roles that I want to live with the highest quality (arête). My Biog 5 are: father, husband, teacher, student, warrior,
Myers-Briggs Type Indicator: ENTJ I am getting closer to the “I” as I get older which moves me from “Leader” to “Scientist” in the typology. My scores are very high on the NT domain, which gives me a global, theoretical perspective. I notice that I am always searching for the broadest generalizations that can be made from an incident, or the widest application of an idea. It doesn’t take much for me to go off on a tangent. I am least happy when bringing a project to a conclusion, as it feels stifling and disconnected from the dynamic world around me. Finality and endings are disturbing to me, and I dislike graduation ceremonies above all else. I am much more at home in the developmental and conceptual phases of any project. I get bored easily by data gathering and have learned to offload that task to others. I am a good project manager, as I have learned to build teams of various skills and aligning tasks with strengths.
Kolb Learning Style Indicator:
The Kolb LSI measures self-reported preferences along 2 dimensions: Concrete experience-Abstract conceptualization and Active experimentation-Reflective observation. These 2 dimensions reflect how we prefer to gather our information about the world and then how we prefer to make sense of it. The intersection of these 2 dimensions establishes 4 quadrants, and can be used as a way to describe a classroom population as well as individual learners. We use this model extensively at the Command & General Staff College, and I have become convinced of its practical uses when used within reason.
In this model, I am classified as an “Assimilator”, which combines a preference for Reflective Observation and Abstract Conceptualization. This means I don’t need to spend too long “in the moment”, fully experiencing every nuance of the moment; I am always ready to begin reflecting on its dimensions, characteristics, descriptions and classifications. As an Abstract Conceptualist, I proceed to place experiences within my larger world view, as a particular example of a class of experiences. I spend little time in active experimentation to validate the data, once satisfied that it makes theoretical sense.
These preferences are helpful when approaching new material where the connection to theory is strong or explicit, because it satisfies my need to be situated in the world. I am comfortable with complexity and nuance and am competent at brainstorming and imagining future scenarios.
The downside of my preferences is that I am prone to overlook deep subtleties in experiences especially if the situation is slow moving. The idea of sitting in a duck blind for hours waiting for birds is my idea of hell on earth. I am also prone to accept theoretical justification as truth and am willing to short change practical validation of new concepts simply because of the theoretical elegance.
As a consequence of knowing this about myself, I find it necessary to do sitting meditations to work on my mindfulness and presence in the moment, to learn to appreciate the experience simply on its own merits, without a need to explain it or frame it as part of a larger construct. On group projects I am careful to include pragtmatists and naysayers who will insist on evidence and results from fair trials before we adopt policy changes.
These strengths and weaknesses, and my accommodations to the limitations of my learning preferences are an integral part of my business success as an equity trader which puts a value of new ideas, but also on backtesting and forward risk management.
Brainmodepower typology: AVK, global.
I am off the chart on the audio learning, and on the globalization scale. I have now noticed that when I am really trying to concentrate on learning I do not look at the person talking, but need to doodle in order to free my ears to hear. Doodling helps me occupy my eyes and hands (visual and kinesthetic modes). This has been a problem for others in the past when they would say “Look at me and pay attention!” when I was doing my best to pay attention.
2 stories from combat on this topic which reinforces the power of the insight: On a night attack, wearing night vision goggles I had high explosive rounds land near me and “whiteout” my night vision goggles, and I lost my night vision for about 15 minutes: I was able to command my company though because I could hear what was going on via the radio and I had a sense of where things were based on noise, sounds, and the volume of fire. A few days later, in the daylight, I had a hand grenade land very near to me and I didn’t have my earplugs in. I was deafened for about an hour before my hearing returned, and it was the most frightening experience I had ever had. I felt absolutely cut off from the world and was unable to command effectively. It was terrifying, even though I could see everyone around me and could consult a map.
I am a fast reader and I prefer to read in burst of 10-20 minutes, rendering my notes in visual, mindmapping form. I will generally develop detailed cognitive maps and turn them into slides as cues for recalling detail and cognitive structure. I take semi-structured notes on standard note-taking forms that I have developed over the years to suit my style. I will often color code the notes to make structure even more apparent. When I review notes from my Masters program (15 years ago), they make perfect sense to me and I can recall the circumstances of the classroom and the moment as if no time has passed. This form of “chunking” supports my assimilating style.
At any given moment I may be engaged in reading up to 20 books at a time in various locations, and I follow my mood or sense of urgency for picking up the next book to read. When I find myself drifting I stop and do something else until my attention is focused, rather than trying to force concentration.
I can concentrate for hours at a time in reading if needed, but I prefer the shorter bursts when my mind is feeling especially sticky. Learning to crate feelings of “sticky mind” is an essential part of my practice of sitting meditation, which Buddhists call “child’s mind”.
I will rarely read a book from cover to cover, preferring to read from top down and outside in, by examining the covers, introduction and forward, table of contents, index and references and chapter summaries first, and then come back to the book after 24 hours when that has had time to digest and become embedded. I will then skim chapters based on my interests, and finally skim the whole book. I have adapted this technique from Mortimer Adler’s “How To Read A Book” (Adler, 1940) and it has helped me integrate a lot of material from a broad array of fields.
I am not very good in free form dialogues of material, preferring to hear structured presentations that reflect deep inquiry on the part of the presenter. Lectures are excellent for me as I can listen carefully, while doodling and seeming to daydream in my own personal comfortable space. I enjoy writing and working on a topic while having a background lecture playing, trusting that if something interesting is being said that I will tune in to it. Some of my most creative work is done in this manner in the apparent cognitive dissonance set up by 2 different information streams. I am listening to a Teaching Company presentation on Chaos by Dr Stephen Strogatz as I write this.
My biggest problem as an adult learner is procrastination and time management, since I am always eager to read one more thing before generating my final conclusions. I also find it difficult to recast my theoretical framework of information once established and will generally try to find ways to accommodate pieces of my original insight in an evolving understanding. I try to delay taking final positions in order to gather more information for this reason.
I find it amusing that despite a strong rational component, and a structured approach to learning, that my decisionmaking and sensemaking is much more intuitive than rational. I trust my instinct far more than my conscious mind. This is a habit perhaps ingrained into me from 15 years of being an infantryman in combat and trusting my senses in dangerous situations. This habit of mind is so odd that it is even the subject of discussion among peers who know me well and wonder how I can be so rational and yet make instinctive, intuitive decisions.
I have been teaching in the Command & General Staff College for 8 years and have reinvented my whole approach to teaching as a result of the action research inquiry while attending CTU. While I acknowledge the need for competence at the data level I also have become much more aware of the importance of the social level of learning. I no longer think that learning and education are like filling up a pail, but are rather like lighting a fire (to paraphrase Yeats).
I am trying to create an educational space in the classroom, in the college, and in my professional work that encourages and supports free inquiry, a commitment to truth and academic freedom, and both a respect for and a seeking out of diverse perspectives and points of view. As a teacher in the classroom I try to model the behavior I seek from students, by the quality of my preparation, a concern for the learning and perspectives of others, and a willingness to be vulnerable in my ongoing search for knowledge. I am encouraging as many means of formal and informal feedback as possible to help students shape their own educational programs and outcomes. I encourage and support their inquiry in my classes and through support of their independent studies. I reach out to other colleges and programs to create networks of learners and to act as a catalyst for learning.
I respect the action research construct of multiple ways of knowing (experiential, presentational, propositional, and practical) and acknowledge the learning that can happen through 1st person, 2d person and 3d person action research.
I favor the connectivist learning school of thought being developed by George Siemens and Stephen Downes at University of Manitoba, as I believe it represents a realistic, sound, robust and challenging way of developing knowledge and practice to appreciate and thrive under conditions of uncertainty. More at: http://www.elearnspace.org/
As part of my research I am looking carefully at how to add Voice to the environment by encouraging, supporting and promoting the diverse needs, intentions and inquiries of faculty, students and curriculum developers in a way that advocates a move away from an industrial age view of curriculum and towards one of connectivism and individuality. In this sense I have taken on an advocacy perspective that is values-based but which respects the perspectives of other members of the action research teams that make up the projects.
My role as a father influences my role as a student. One of the important reasons for me to begin the doctoral program was to set a personal example for my kids, who at ages 18, 15, 11 are getting to see their dad doing his homework and reading books every night as a priority. My father set the same example for me as a kid as he went to night school to work his way up the engineering ladder from “shop rat “to full-fledged design engineer. I’ve been trying to re-learn math and physics to be able to keep up with my son who is getting ready to go to college next year to be a physicist or an engineer, but just like in video games, I believe he has passed me for good. I am content to listen to him and get him the occasional book to feed his curiosity.
Husband: without my wife’s support I could not have dreamed of taking on the active role of student once more; in fact she finally told me to stop moping around and dreaming about it and just get it done. I need that boost from her to get moving at times. I want her to be proud of my work and my goals.
I use Warrior in the eastern sense, as one who is called, by his dharma, to seek mastery of self first in order to protect the weak and promote justice and compassion in the world. This calling is well described in Trungpa (1984). In this sense, my role as an adult learner is to focus on those things that I ought to be learning in order to improve my practice; to find worthy teachers and learn from them; to questions my own assumptions and preconceived knowledge in order to step outside what I already think I know and to follow my beliefs to their core to find the source.
Warrior learning also has a strong service component, and so the topics for inquiry, the choices for action research must satisfy the “so what” question, must be directed towards a virtuous end. For me, the choice to do action research within my college represents a way to do the right thing in support of my duty to country and soldiers whom I support. Action research’s methodology strongly supports these values, particularly when fellow inquirers are positioned as co-researchers.
Adler, M. & Van Doren, C. (1940). How to read a book. New York: Simon & Schuster.
Strelecky, J. (2007). The big five for life: Leadership’s greatest secrets. New York: St Martins’ Press.
Trungpa, C. (1984). Shambhala: Sacred Path of the Warrior. Boston: Shambala Publications.
Typically, traders will apply various technical analysis indicators to the behavior of price of an instrument in order to find moments of advantage. Many times these are combined in systems of ever-increasing complexity and apparent sophistication. All of these concepts however are based off of direct behavior of price. That’s not the only way that technical analysis can be used however.
Here is an example of using technical analysis in a nontraditional way to quickly and consistently assess the relationship between a broad index and one of its underlying components.
Begin by calculating the relative strength of an instrument against its index. Perform this calculation over a look back. That makes sense based on the timeframe you intend to hold the instrument. As an example, you may have the belief that swing trading large-cap stocks in the Dow 30 industrials offers an advantage to the agile trader who cannot afford to watch the market throughout the day.
You might take the Dow 30 industrials is a reasonable set of ultra-large-cap stocks which are not likely to go bankrupt overnight and which behave in a conservative fashion compared to some small-cap and overseas stocks based on the wealth of analysis and broad ownership by institutional money. It is rare for these stocks to be wildly mispriced and their stock performance is characterized by relatively smooth changes in price from day to day.
At any given time, one or more of these stocks will exhibit leadership qualities in that it will be outperforming the broad index and its peers for one to four weeks. At the same time there will be a set of these stocks that are underperforming for the same time.
There comes a moment when the individual leaders and laggards can no longer maintain their extreme behavior and they begin to revert to the mean of the index itself. By calculating the relative strength of each of the stocks on a daily basis and plotting that performance on a standardized scale of 0 to 100 for each stock, you may be able to find moments when the extreme condition begins to stabilize and reverse.
In the case of the laggards, this may alert you to a possibility to buy value just as it is beginning to revert to the mean.
In the case of the leaders, this may alert you to the possibility of the outperformance period coming to an end.
By applying these relative strength performance curves on a channel-based technical indicator like Williams %R, you might treat the upper 20 and lower 20 percentiles as the regions of extreme behavior and thus ready yourself for a reversion of the previous trend.
I have not subjected to this idea to rigorous back testing yet, but the concept is intuitively appealing. The insight comes from inductive reasoning based on years of observation and may be worthy of closer study.
I have a good friend who has been struggling for years to become a professional trader in the stock market. He is well-capitalized, smart, a quick learner, humble, energetic, self disciplined and passionate about his desire to be a full-time trader. And yet, after years and years of trial and error he has not made enough progress towards his goal to feel confident that his goal is realistic.
I told him that I was willing to be his coach provided he put in the effort and was willing to go beyond his beliefs which may have been the source of his limitations.
The good news is that in a matter of weeks through rigorous self-examination and brutal honesty and a great deal of personal work, he has made major strides after all these years in realizing his goals.
After several weeks of observing his trading patterns in real time, together we concluded that his curiosity and eagerness were not really strengths at all in the way he was applying them.
He was more than willing to pull the trigger on ideas that seemed to make sense in the moment, but what he lacked was disciplined focus to master and implement a strategy that was most suited for his personality and strengths.
Once we had enough trades to establish a statistically significant population to examine, we focused on the patterns and targets where he had performed to the highest levels with the least amount of effort.
In his case, it turned out that the best thing that he was doing was trading Coca-Cola on an intraday basis, because he found himself able to tune into its normal price patterns and find price levels of support and resistance that gave him favorable reward to risk ratios when traded at his level of capitalization.
By sticking to a couple patterns that were simple and robust, he was able to develop new levels of mastery in a remarkably short period of time on his favorite target. His performance statistics were so outstanding that there is every reason to believe that he could trade just that symbol for living forever.
Coca-Cola is a marvelous company and its stock behaves in a way that makes short-term trading and swing trading very accessible to the beginning trader.
It is liquid, smooth and orderly, and sufficiently volatile to allow outsized gains for measured risks. Because it is a large-cap US stock, it must be owned by large-cap mutual funds so there is always a population of people who are ready to buy Coca-Cola, which as a certain degree of fundamental safety to the stock.
Human nature being what it is though, it is a daily task of management to keep my friend focused on what’s working for him because the very success he experiences in Coca-Cola encourages him to go back to his old ways and try on other new ideas. If those don’t work, the negative emotions he feels find their way back into the way he trades Coca-Cola.
This is the insidious nature of human emotions in the trading arena. It must be monitored and guarded against daily basis. Each new day brings its own new challenges and you cannot let down your guard.
The results though speak for themselves. If my friend has the will to do it, he already has the skill to be a full-time professional trader Coca-Cola.
Maybe the most important quality in a coaches the ability to remind us to remember and apply the things that we already know.
A simple explanation of reflection theory comes from the mathematical field of set theory and statistics. The theory can be made as complex as you want it to be, based on your interest in statistics and math, but the essence of it is intuitive and has some interesting insights for back testing your systems in the stock market.
To begin with, the reason we conduct back testing is to ensure that our intuitive insights, which are triggered by enthusiasm and emotion in our pattern matching brain, may actually have some objective truth to them when subjected to rigorous analytical confirmation.
The manner in which we conduct back testing and the assumptions that we used to drive the analytical engine are all important when it comes to having reliability and confidence in the results. If you start with a bad set of assumptions, then even the most perfectly applied back testing technique will come up with invalid and unsupportable conclusions.
Back testing is like logic and deduction in that sense. If you start with bad information, you can be perfectly logical but come up with conclusions that are logically sound and don’t work in the real world.
Reflection theory suggests that in normally distributed populations, that for a sufficiently large population there will be subsets which have the same characteristics as the larger population from which they are drawn. This leads you to conclude that the inferences you draw on samples can be applied with great degrees of confidence to the behavior of the population at large.
At the simplest level, if you believe that the market returns are normally distributed, then you can take samples at will and data mine them for relationships between variables of your choosing and then apply any edges that you find to the broader population with great confidence.
Everything we know about the distribution of stock market returns, though, is that they are not normally distributed and that therefore great care must be taken in your sampling technique and in your out of sample testing for validation for any rule set that you propose to put real money on.
There are proponents of the idea that the market is so abnormally distributed that there is ian irreducible chaotic nature about the market which should put an upper limit on any risk you propose to take, no matter what the statistical evidence from back testing suggests.
The short answer to this is: place your confidence wisely and always have an out. Never be the first mouse, unless you have to be, and remember that there are no old, bold mountain climbers.
Chat rooms and discussion boards are filled with the talk of what to do about stops for active traders? This discussion can seems take on an almost religious fervor and I have never actually seen a single discussion thread where anyone’s mind was ever changed or consensus was ever reached.
That probably relieves me of the burden of trying to convince you one way or the other and simply let the described my thoughts on stops and how I apply them to my own trading. It’s not impossible that something I say may trigger a similar idea that you can apply in your own trading. That’s my hope. my strongest belief about stops actually does take on an almost religious belief in its importance and purpose. That is my belief in the importance of placing your initial stop in the market immediately after entering your trade and leaving it alone, never to be lowered.
I feel so strongly about this belief, that on the day that I’m no longer able to do this I will hang up my trading career and walk away. I believe it’s that important.
Your initial entry into the market is up function of your belief in the edge that you perceive you have and how it applies to the current conditions of the market.
This insight comes with it your analysis of what price action would convince you that your positive outlook is wrong. In passing, if there’s no price that would cause you to change your mind and I would advise you not to quit your day job. once you have anchored your initial capital preservation stop in the order book, you can monitor your reward to risk ratio was a function of the profit targets that emerge as reasonable based on subsequent price action. You don’t know what prices going to do after you enter, but you can be sure about the price that will tell you your initial idea was wrong.
The market will tell you if you’re wrong, and if you cannot put your initial stop in the order book and deal with it, then you’re not prepared to admit you’re wrong and you’re not prepared to be a trader.
By placing your initial capital preservation stop in the order book, you have established the lower limits of uncertainty based on your best knowledge and skills at the time.
To adjust this stop lower at any time after you have entered the trade is to mistrust your judgment and would be an indicator that you’re not prepared to trade that position to begin with.
By putting this stop physically in the order book you have established your belief in black-and-white. This will be the source of great psychological strength for you to record trading career.
And when you can take a professional loss when the price moves immediately against you after your entry, you can consider yourself to be a trader.
In my years of trading, I have never seen anyone trade who could adjust their capital preservation stops lower on the fly for some psychological and analytical reasons.
It has always led to the disaster on their part.
I’m not saying that these people don’t exist, it’s just that I have never met any of them in 20 years of active trading.
You will do what you’re going to do, but I recommend you put that order in the book.
There is general agreement that Ted Williams was the greatest hitter in the entire history of baseball.
He brought a science to the practice of hitting, a committment to the informed practice of his craft, a deep understanding of his strengths and weaknesses as a hitter. These combined with his natural physical ability to produce a hitter whose like will probably not be seen again.
I want to focus on his approach to hitting and his keen insights to his craft which I think directly apply to our craft of trading.
Williams studied every at bat and every swing, and developed a matrix of his personal strike zone which showed what his average was in every region. His strike zone measured 7 baseballs wide by 11 baseballs tall. Knowling his average for each of these areas helped him abide by his first rule of hitting: swing at good pitches. If you chase bad pitches then that’s what you will get from professional pitchers.
He advised that you also had to do your homework: preparation gets your mind right. I equate this to our preparation phase of trading, which includes knowing the market classification, the patterns that are working, the oversold or overbought condition in the short term, amd the specific volatility statistics of the market and our preferred targets.
Williams’ final piece of top level advice was to be quick with the bat. Being quick in action means you can wait a bit longer to commit, you will be fooled less, and you will be more confident in your execution. We can apply this advice by streamlining our decision making process by rehearing, by reducing our required information to the minimum needed to act, and by anticipating events in order to have a plan of action worked out ahead of time.
It’s remarkable how similar the keys to high performance really are between different fields of human effort.
A friend of mine who is seeking to develop his skills as an equity trader asked what book on trading he should read if there were only one.
I started to think about the different masterpieces I have read and have applied in my own trading. There are masterpieces of fundamental analysis, of technical analysis, of trading technique, and investing strategy out there. It was a daunting task to settle on just one.
When it finally hit me, though, everything fell into place. There is one book that is so powerful that it stands out head and shoulders above all others to such an extent that it is not even close.
It’s a book that has a direct effect on the trader no matter what style, time frame or technique is being applied. It works for men and women, for any kind of trader in any kind of market.
Its’ a book that bears reading and re-reading and will always allow for new insights and nuances.
It’s a book that adapts to you and your emerging style.
It gets better the more you use it.
It’s not cheap but it IS free.
It will reward you based on the amount of time you put into it. It will perfectly mirror your needs of the moment and help you find your strengths and weaknesses.
You can buy it in any store that sells office supplies, and while there is only one edition, it can fill many volumes.
It tells many stories, and the plot will often change before your eyes. It will take you to places you never imagined, although there is a thread of familiarity that ties everything together.
In short, it contains everything you will need to be successful as a trader if you put the time and effort into it.
Naturally, I am speaking of your trading journal, an intensely personal unique approach to how to trade the markets.
I’d suggest that the time and effort you put into refining the craft of journaling and reflection will be directly proportional to your continued success as a trader.
So, if there’s only one book for you to read and study as a trader, that’s the one.
We know from cognitive science and learning theory that humans are storytellers by both nature and nurture. Knowing this about how our brains are wired can help us in a couple interesting ways as lifelong traders and learners.
Generally it is easier for most people to learn when the new information is presented in the form of a story. Therefore, when you are looking for new information about how to trade effectively, you would be well served to attend to the stories the teacher tells, and check to see if the story resonates with you.
If you can’t “get” the story, it will make it very difficult if not impossible to make sense out of the details.
If you “get” the story though, you have a storyline that acts as an organizing structure or “schema” for you to attach the new data to.
The best stories for learning are real, short, interesting and human. That makes it easy to see how the new information can apply to you. For teachers, this means that you will improve your practice by adding short, sharp, engaging stories of real people in similar situations to where your students will be heading in the future.
Your stories will be even more powerful when they touch the emotions and provide an incentive to achieve a favorable emotional state. That’s why most of the powerful selling techniques tell a story about a very desirable emotional state that can be achieved if only the customer will exchange money for the magic bullet.
As traders, you might consider trying to develop the “story” of a stock or an Exchange Traded Fund. By proposing a “storyline” that the target “could” follow, you can then identify price points where the storyline is violated and you can exit quickly because the target is following a different path or script.
There are extraordinary possibilities for improving your trading and learning performance by appreciating the powers of stories. Can’t you just imagine it!?
The market goes through changes all the time, as market participants and their methods and objectives change through time. Sometimes trend following will dominate, sometime reversion to the mean trading will be effective, other times channel trading with strict profit targets will work.
It is normal for traders to develop preferred methods of training, based on our experiences and our preferences, and our style of trading and our chosen markets. It is normal to have periods of time when your preferred methods are especially effective, and other times when it is heavy sledding.
As market conditions and patterns change it is normal to see a change in how effective our chosen methods perform. Since market conditions change in unpredictable patterns and over changing periods of time, it is never easy to formulate rules that govern how to navigate these transitional states.
If you are looking to be a full time trader, you can expect to have to routinely sense and adapt to changing market conditions on a regular basis. It is worthwhile then to develop a mind set that expects this kind of routine change, and a system to routinely manage the transitions.
Here are some things you can do to help you stay in tune with a dynamic market
1. Reduce the frequency of your trading so that you only trade patterns that strictly meet all of your preferred criteria.
2. Trade at reduced risk levels and reduced size until a new pattern of performance emerges.
3. Monitor the moving average of your trade results to be alerted to reduced performance quality which can signal a change in market conditions sooner than is evidenced in individual technical indicators.
4. Have a variety of systems and strategies that are known to outperform in certain market conditions, so that your action plan adapts to a changing market.
5. Use adaptive risk measures that fine tune your system so that your system parameters remain routinely aligned with market conditions. Having trailing stops that are a function of Average True Range (an adaptive market indicator) is an example of this kind of adaptation.