The Ockham’s Razor | Tackle Trading
≈ Opening the gates of Heaven. ≈
William of Ockham was an English Franciscan friar, a philosopher, and a theologist, who lived between the 13th and the 14th centuries. He is attributed to be the author of a problem-solving principle that stated: “Simpler solutions are more likely to be correct than complex ones” which became known as the Ockham’s Razor, the Law of Parsimony. In other words, if presented with competing hypotheses to solve a problem, select the solution with the fewest assumptions.
Centuries later we have the K.I.S.S, “Keep it Simple, Stupid”, or, as you’re going to see in tomorrow’s email, “Keep it Simple = Success”. Much more interesting.
Have you ever experienced the liberating feeling of saying “I don’t know”?
Have you ever experienced the instant relief of saying “I don’t understand why but I make money just the same”?
Like the Ockham’s Razor, these two situations are the keys that open the gates of Heaven and keep us away from Hell at the same time. Long Heaven, short Hell. Pairs trade.
How many economists or finance specialists have you heard saying “I don’t know” or “I don’t understand why”? It will be much easier to find a photo of your friend’s mother-in-law inside his wallet or the Bigfoot, than finding an honest specialist. Once they run out of answers either they blame uncertainty or start throwing some crazy theories behind a simple selling pressure, for example.
Traders who keep things simple and don’t understand many things are the ones who are capable of understanding a few really important things.
Chart of the Day: The Ugly Duckling
The Russel 2000 index is the ugly duckling of the financial markets. While the other indices have a much prettier chart, the poor IWM has a tilted M formation type of chart, making lower lows and lower highs. The reason? Ask the specialists. They always have answers to everything. We don’t. We just make money.
Video of the day: How to Roll a Covered Call (& Prospect Theory)
Coaches Matt, Mark and Noah talk about how to decide whether or not to roll a Covered Call and how your emotions are reflective of Prospect Theory.
Originally published at tackletrading.com on March 28, 2019.
