What Robocop taught me about investing | Tackle Trading

≈ Kind of suit is this? ≈

– Somehow he is overwriting the system’s priorities.
— The human element will always be present. Compassion, fear, instinct will always interfere with the system.

— Robocop (2014) —

We are not automated machines with AI capabilities. We are much more complex than that. Not even close to understand ourselves and we are already building machines our own images.

When a given system depends on us to execute it, we fail to deliver what it needs. We think too much, contextualize too much, hesitate too much, feel too much, analyze too much, think too much, fear too much, hope too much. No wonder why computers are so fast: they just execute the rules inside the system they were built to be running. We don’t.

But we can. Just like computers, we can run the rules without hesitation.

This is what we call the System-Thinking approach. It consists of a mindset that neutralizes our feelings and emotions. Fear, greed, hope, and despair, although part of our innate set of evolutionary capabilities are bad for trading systems. The System-Thinking approach brings order to this chaos, removing the (too much) human part from trading.

However, the System-Thinking approach is not a built-in functionality. We have to train it.

If we want to fly like birds we invent an aircraft. If the stars seem out of reach we invent a spaceship. If the ocean is too deep we invent a submarine. If we want to touch heavens we invent immortality. Why can’t we just pretend we are part human, part machine and run our systems without hesitation?

Kind of suit is this?
It’s not a… suit, Alex. It’s… it-it’s you.

Chart of the Day: It’s the end of the world as we know it.

No, not at all. The chart above depicts the Crude Oil futures contract (may 2013 › nov 2018, weekly). The ≈3-year uptrend is now broken. That beautiful channel is shattered. On the left side of the image, you will find another break of support which has led to an almost 3-year bearish trend.

Study the cycles of the product you are trading. Study the seasonality, the supply and demand forces. Study the political powers that go behind the price movement. Back up your investment thesis with something tangible but not set in stone. Things can change and you can be wrong. Have a system with rules in place and execute them with no room for improvisations. Leverage, position sizing, and risk/reward rules are key to your long-term survival in the financial markets.

Video of the Day: Robocop Trailer

Kind of suit is this?
It’s not a… suit, Alex. It’s… it-it’s you.

Originally published at tackletrading.com on November 27, 2018.