Maximum Achievable Skill

I realized today I enjoy competing mentally against others. The statement seems silly. Many people enjoy competing against others in various ways. For my part, being unwilling / unable to compete in many phsyical events (I'm happy to race you in cycling or sailing), I've found mental competitions more suiting. It would seem logical then to assume I am "smart". I can assure you, I am not ;-) I have a terrible memory, ontop of a split brain which excels neither at the creative and abstract nor the logical.

This desire however does explain my attraction towards trading. It's a player versus player game with real life stakes and consequences. In addition, some of the brightest minds in the world have been tasked with outplaying each other; but the playerbase itself and potential payoff is huge. Perfect for the obsessive, the game doesn't end until you quit or lose1.

Now, I like to think of myself as a capable learner. Given enough time, I should be able to achieve success and become competitive in whatever area I apply myself to. However, the real world is a harsh reality for such a fragile mind as myself :-) Experience has shown I am unable to do well in things that are player versus player, such as PC or board gaming. Sure, I may find some limited success in a small audience, but normally I find myself outplayed and not quick to pick up the tricks to winning.

Let's consider an example. Consider a chessmaster. I understand the basic rules of chess enough to be able to move all of the pieces properly, as well as pursue the objective of taking the opposing king to win. However, the chessmaster will continually beat me at games. We play several times daily for months, and yet I find myself unable to beat him. This brings us to an interesting question. At some point, will I be able to compete against the master? Eventually thru the games I play, our knowledge should equalize -- or can I never catch up to his level of knowledge? By definition he is my teacher, and has a headstart on his knowledgebase, all the while expanding it with every game he plays. Assuming the master never allows his human error to make a wrong move, it would seem impossible for me to ever beat him, save for him making a mistake.

To fully understand the problem, we must look at how someone can become skilled at something like chess. In my example, I am assuming my skill comes from me emulating the chessmaster and learning his moves. If I am capable only of emulation of skill, aside from human error I should not ever beat him. I may indeed find success against other players, assuming my mentor was more skilled than those I play against, I by extension will also find success. However, there is another way. I could apply new thought and originality to the problem. In theory, I could best the chessmaster in my first game with him.

It is this second method of successfully competing against others that the thinker is driven to. It would seem for most who wish to do well, simply emulate someone who has had success. For the thinker, your task is so much greater. You are compelled to see beyond the skill of your opponent; to understand them, and then compete above and beyond them. For the thinker, there can be no other path. Suffice to say I'm a thinker (or someone hopelessly wishing himself to be one).

1. Humorously, you can't really "win". You can only stop playing. Any definition of winning or losing when you stop is up to you.


Why exits are more important than entries

Often when looking at trading strategies you find yourself looking for keys to figure out the start of a breakout or trend. Jumping on-board when a trend is starting ensures you have a good ride on the trend for healthy profits. But focusing on the entry point is flawed logic. It is the exit point that determines your profit, and ultimately, your success.

Exits are much harder to get right. Whenever you start something you have to think about your exit strategy. It's so easy in the beginning to get into a trade; think about the end. I find the end of something is far more interesting and telling than the beginning. This applies not only to trading, but life as well. Look over your trades for the last week. When did you exit the trade? Why? Don't get caught up on the P/L, or attempt to optimize the exit based on hindsight. You need to understand the raw thought process behind your exit. Study yourself, watch yourself. You'll find your logic may or may not hold when examined after the situation.

A wise sailor once told me, better to be on land wishing you were sailing, than sailing wishing you were on land. It sounds cliched, I know; but think before you trade. Not about profits, entries, or leverage, rather focus on how you're going to get out of the trade.

For myself, I think it's time I changed my exit strategies to be more focused for success, instead of minimizing damage. I guess one should play to the outcome you wish to see, and not the outcome you're trying to avoid.


On being away

I've been way undertaking a study of man. Of his creations, the cities and their history. There is something that you can take away from a place. Seeing to the extent possible those places and things that others before you have seen and walked. Who can understand the birth of Wall Street, or the spirit of the same place in the 1950's without seeing it?

Who would say "no" to visiting the Bahamas in the 1960's? How about the same place in the 1920's? I think Jesse Livermore had the proper idea in his "Reminiscences of a Stock Operator". Taking a month to fish in the Bahamas -- being totally removed from any knowledge of something as simple as the price of wheat or the latest quote on GOOG. Those sorts of disconnected experiences are hard to come by now.

Time and place are a unique combination in life. They can't be recreated. We all have unique opportunities to experience during our allotted time here on earth. While hindsight is 20/20, we can still seek out those times and places that others may one day speak of and think about. It is a worthwhile endeavor to see not only the birth, but also the life and death of a thing.


An english gentlemen

On my recent tour I was pleased to discover not only the stories of those magnates from the golden age of capitalism, but I was treated to a step back in time. Seeing their possessions and the cities they helped grow and thrive within was an invigorating experience.

Wikipedia describes an english gentlemen as follows:

To a degree, "gentleman" signified a man with an income derived from property, a legacy or some other source, and was thus independently wealthy and did not need to work. The term was particularly used of those who could not claim nobility or even the rank of esquire.

It's a romantic dream, but a dream nonetheless. To have been one of those gentlemen during the birth of a nation; rather not just a nation, but an Empire. Does such a chance still exist elsewhere in the world? The time for the gentlemen has occurred in both European and North American history1. Perhaps, there is indeed room for it to occur elsewhere.

1. Likely someone else can point to this occurring in central and southern Americas as well