Beware the info illusion

Trader's Mindset

Sep 02

Early on, one way I differentiated myself among others was to make quantified, falsifiable predictions. Among some other market participants and vendors, you will often hear the phrase they don’t predict the market.

The question to ask is that if whoever you are following isn’t willing to go out and predict the market, provide strategy, or make real calls then how are they going to help you make money?

I call this the information illusion. It is the illusion that you are learning something or gaining something of value. It is a big problem with all the financial media and now it is a problem among twitter and stocktwit traders. How is that helping anyone to tweet out “market moves fast these days”? Start providing real value or get off the mic!

A key giveaway is saying something that only portends some knowledge and has a few bits that might be difficult for others to understand. That’s the “hook” to get you interested to figure out what the hell they wrote.

Example, I could tweet out some unqualified information like, “Strong buying off the 2825. Were Chinese banks/insiders buying?” Yeah maybe, maybe not. Who cares, who knows. Question you have to go back to was how will that help you make money? Nonsense that isn’t qualified probably won’t.

The information illusion is very prevalent everywhere. For example, years ago I would read the market news to try to understand why things were happening, and then I noticed the headlines changed based on what the market was doing. The media was following and narrating the markets– not leading or predicting them in any way.

The information illusion is present everywhere. The worst example are trading books filled with generic information. If you write a trading book on algorithmic trading then please don’t fill it with hundred pages on general computing knowledge.

Now, I have been considering whether or not traders working alone vs. together have better chance of success. As such, I am thinking of offering the Quantitative Advantage with exclusive research and insight. As traders, when we find something that works it makes sense not to share it with the masses who (1) didn’t earn it and (2) will dilute it. On the other hand, I have a lot of systems I do not trade, and I find it more difficult to do the work required to keep innovating–when not offering systems.

About the Author

The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at