Making decisions with imperfect information

A man with a watch knows what time it is. A man with two watches is never sure." Segal's Law

Successful trading comes from being able to make decisions with imperfect information.

However, like the man with two watches, we often try to look for multiple indicators to confirm our decision before we make a trade.

After all, we want as much going for us as possible.

But, waiting for everything to be aligned in order to make a trade will not lead to success.

By the time anything becomes completely obvious, it has already happened.

As an example, let's say we put 100 people in a field on a hot summer day with the sun beating down on them and not a cloud in the sky.

Then, let's ask all 100 people, if it is going to rain - with not a cloud in the sky, almost no one would predict rain.

Let's say a few clouds enter the sky and we ask the same group if it is going to rain.

This time a few more people are likely to predict rain.

Now, let's say that the sky fills with dark clouds.

When we ask the same 100 people if it is going to rain, most will say it is going to rain.

The only way to get the entire group to agree that it is going to rain is if it is actually raining and they are all getting wet.

This is how decision making in trading works.

If you wait for perfect confirmation of what you are predicting, it will have already happened.

Looking for more information, like the man with two watches often only serves to confuse your decision making. This is the reason that I coach traders to concentrate their focus in one timeframe on one chart.

I have traders in the Electronic Trader Mentoring Program who successfully glance at other timeframes for context. But, constantly diverting your attention from one timeframe to another will only result in your being confused.

Meaningful success in trading comes from learning how to make rational decisions before the outcome becomes obvious to everyone else.

No matter how advanced you become in your trading, you are still going to have to make your trading decisions using imperfect information.

If you would like to learn how to dramatically improve your decision making power, check out my Electronic Trader Mentoring Program.

You can find out what other traders, like you, think of having me as their trading coach by clicking on the testimonials tab at www.ElectronicFuturesTrader.com.

Wishing you success in your trading, Jeff

Copyright © 2009 by Jeff Quinto
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