Trading and epistemology
I've been racking my brain about where to start with these blog posts, and I finally realised that I should just start from the beginning; well the beginning of how I came to start thinking about the things I'm currently thinking about. It all begins with trading.
Trading is simple. There is in essence only one decision to be made, from one of three options: do I go long, short, or choose to not participate. The beginning trader knows this. But as they start to experience losing, the beginning trader introduces complexity; complexity designed to protect them from the unknown. This doesn't work, and the beginning trader begins to ask deeper, more important, questions; questions that allow the beginning trader to either move to the next level or quit the business:
What is my edge and if I don't have one how do I get one?
How do I get an edge that will stand the test of time or how will I know when an edge no longer exists?
Can I even satisfy questions 1 and 2.
These are all questions of epistemology - the branch of philosophy that delves into concerns about knowledge - how do we know what we know, how do we accumulate more knowledge, what does it mean to have knowledge and how confident can we be in our existing knowledge? In my view, the successful and seasoned trader is a practitioner of epistemology and must, directly or indirectly, confront many of the key areas of the field: the problem of induction, falsification or verification / justification, the problem of value and fallibilism; to name a few.
I am a relative noob when it comes to epistemology. I'm not widely read (yet), however, as I educate myself, I find that I already have a considered opinion on what has previously been thought and an intuition for where to direct further reading. This is due to almost 2 decades of thinking about financial markets and (practicing) trading. It should not be surprising that I find myself to be a staunch supporter of all things Karl Popper and draw from the thoughts of David Deutsch and Nassim Taleb.
What's the point of this blog and who is it for? I don't know. In a way, the blog is for myself; it's an opportunity to get down on paper (so to speak) all of the things that I've been thinking about and provide myself with an opportunity to learn and think and (hopefully) understand some more. Should I gather a collection of followers, and dare I say contributors, then so be it.
The first thing I would like to do is to build up and discuss (through a series of posts) a visual epistemological model. I've already laid the groundwork for this in my last annual letter for Tomas Capital: I suspect that this will be an exercise that I revisit from time to time as my thinking matures (I've already had some thoughts about where my original conception may be wrong).
Once the majority of the model is conceived, I will make a place for it on a separate page of this website: I'll be referring back to it often with thoughts about trading, financial markets, artificial intelligence, psychology, politics, philosophy, the internet and more.
DISCLOSURE
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING COMMODITY FUTURES AND OPTIONS CAN BE SUBSTANTIAL.
THIS COMMUNICATION IS FOR INFORMATION PURPOSES ONLY AND SHOULD NOT BE REGARDED AS AN OFFER TO SELL OR AS A SOLICITATION OF AN OFFER TO BUY ANY FINANCIAL PRODUCT, AN OFFICIAL CONFIRMATION OF ANY TRANSACTION, OR AS AN OFFICIAL STATEMENT OF TOMAS TECHNOLOGY PTY LTD OR RELATED ENTITIES.
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