Sunday, 13 February 2011

Art vs Science

Continuing on from my post a couple of days ago about falling in love with positions and going into games with a bias, I have a couple more things to add. Last night, one of the midnight NBA games was the Atlanta Hawks v Charlotte Bobcats. 

As I wrote before, one of my 'like' teams are the Bobcats, but having backed them they went on an 0-18 run to trail by 22, at which point I decided that enough was enough and reluctantly made my screen match my face (red all over). 

Somewhat annoyed, I no longer felt in the mood for trading and called it a night, except that I couldn't sleep. Maybe two hours later I got up to look at some other games, only to find that incredibly the Bobcats had rallied and won by two with a last second buzzer beater. To say this made me angry wouldn't be accurate, but I was a little fired up. Checking the scoreboards for other games, I found the New Orleans Hornets v Chicago Bulls game in the fourth quarter and after watching for less than a minute, I formed the opinion that the Bulls (down by four and priced at 2.7) appeared to have the momentum (all important in basketball) and took a position on them. In short, I let the bet run, they won going away, and I had made up for the earlier loss, although not the earlier 'lost win' if only I had let that bet run, if you follow.

Now, I generally don't jump into games in progress, because I don't have information that I need - things like foul counts and times outs left, all very important, or so I thought, but maybe that 'blink' moment Malcolm Gladwell writes about is all you need, and possibly it is actually advantageous in trading. You may not know all the stats, but maybe what's more important is how the game feels. I guess this is the 'intuition' that commenter Mark mentioned. His comment was this:

I agree that you need to take the emotion out of trading but do you think that there is a place for intuition within the discipline.

Do you think that if you have "a bad feeling" about a trade you should still make the trade if all of your research says you should.

What then would happen if that trade went the wrong way and a few days later you had that same bad feeling about a new trade. Would the damage done by the first trade affect your judgement, or taking it further what would happen to your confidence in the numbers if you just encountered a short run of trades that you had bad feelings about and they went on to become poor trades.

I think that if you are an experienced trader who has extensive records of your trades you could look back at them and help bolster your confidence, but what if you are relatively inexperienced, how would you cope then?

I am only making the above point because it sounds so easy to take emotion out of trading but I believe it is one of the hardest things to do.

Great post by the way.
I don't know about other traders, but keeping a record of every single trade would just be impossible. Far too many that are based on 'feeling' or 'gut instinct' - call it what you will, and hard to track all of them. Regarding the impact of previous 'bad breaks' on future bets, the answer is that it depends. If I have had bad beats in games involving certain teams and I have a game between two 'new' teams to consider, the past doesn't affect that decision, but if one or both teams were involved before, then it certainly does. Jason had some words on this:
It is interesting how social psychology has investigate commitment and consistency in people's behaviour and how this may be good and bad for gamblers - often the latter. What I find intriguing is how in some ways we wish to distance ourselves from our emotional attachments but at the same time that gut feeling is often just as compelling and just as meaningful - although often at first thought the two may seem contradictory.
I guess it boils down to whether trading is a science or an art. If it's a science, you build a bot, turn it on and watch the profits roll in while you stay emotionally detached. If it's an art, you rely on your gut instinct and emotions and watch the profits roll in with emotions stirred. I love my numbers pre-game, but my experience is that once a game starts, it is better to rely on feelings, often profiting from those whose scientific approach doesn't adapt fast enough to the reality of what's transpiring. I've written before that if a game is tied late on, then there is no logic behind a big discrepancy in price based solely on pre-game prices.


HCE said...

Hi Cassini,

It is interesting what you say about gambling being a science or an art. The intriguing part for me is how they can or cannot work together - perhaps compliments one another. Social psychology clearly shows that much human behaviour is open to manipulation - simply by the way we are socialized - through habituation we are likely to do certain things as if second nature - and they can be manipulated or influenced to our detriment as bettors.(Someone waves so we wave back - even if we don't know who they are). Imagine that in betting terms. What did I do that for? It is quite concerning how much of our behaviour/thinking is unconscious. That's why it is good to write a blog or keep a diary of not only your bets but your thoughts leading to a bet simply for what it can tell us in the cold light of day. Like Sigmund Freud, perhaps we can make the unconscious - conscious - and learn. Writing as a primary source of data - certainly helps inidicate important factors that often go by unnoticed. Also, I find listening to myself whether talking to others - or internal dialogue - is very important. The times I have stated the major worries regarding a certain bet and then - not listened - and go on to backed a loser (because I ignored myself)is ridiculous. I think we should listen to those unconscious feelings. The unconscious is like a caveman with the best computer you could ever want: in ways it is stupidly rigid but very effecient. It can analyse information so fast and effectively it is amazing. As I noted one of my blog posts the conscious mind interprets 40 pieces of data per second. The unconscious 20 million! The problem is that we rarely notice it is there at all. But it often tries to tell us - in those feelings: our caveman with his computer may not seem to shout too loud (he does but we don't notice) but make no mistake he tries to keep us informed. An experiment comes to mind where a participant was asked to state where an employee was wearing a name badge. The person said they didn't know - but their hand touched their chest - the unconscious mind was saying: 'I know'.

Mark said...

I would tend to agree with what Jason is saying in that for an experienced trader such as yourself who has spent hundreds if not thousands of hours studying figures and watching matches and the markets it is all stored in your subconscious so when you get a feeling of how a game is going to pan out it is infact your subconscious that has trawled through all the data and is then driving your thought processes.

I suppose that is what I could call intuition.