Man or Machine?
Ginni Chauhan
Mapping the intersection of market structure and trading psychology.
If advanced algorithms, software, and systems are cutting-edge tools to trade, then discipline and trading psychology are age-old weapons of the craft. A trader finds himself on the days of ample opportunity—phased out at best, in loss at worst. His focus, bifurcated to mark the best ins and exits, soon turns to non-focus. His patience is never tested, as he fails to wait long enough or often stays out and idle enough. To trade as your manager, apprentice, and client is a hard thing!
If the machine is fed our criterion, then it will fail us—sooner or later. For how would we feed our experience, our insight, and our intuition? Yet, at some point the machine must take the work forward. As another person might fail in similar fashion.Successful trading is a function of risk management. The machines (or algos) can keep that the essential principle to all trading. It’d not feel excited, afraid, stressed, and bored. It would not feel happy at the profits, or question the losses. It’d take fewer decisions, as it’d be following a code, a program—the instructions.
A man, despite trying to do all the above, still trades with money. In awe of something working out, in surprise of his decisions going south. The profit and loss give and take more than money, unlike how they’d treat the machine. A love for the markets and desire for knowledge, materially rewarded. How can one design an algorithm for the same returns?