Human beings have a strange habit of trusting other humans, even when the trust isn’t warranted. Everywhere in mainstream media, statistics are used and misused to convey an agenda. All too often, people ignore the agenda and buy into this engineered information.
To be successful, both in life and in trading, a person must move beyond this behavior. You need to be a skeptic. You can’t put blind faith into a system that doesn’t make its agenda clear. You probably shouldn’t trust it even if the agenda does seem clear. This is just as true when considering pollsters like Frank Luntz as it is when listening to the sales pitches of discretionary traders on Wall Street.
In today’s episode Michael Covel discusses the biases we have as human beings that lead us to poor investing decisions. Most notably, it is a bias that prevents us from trusting algorithmic trading, even when a human alternative is demonstrably worse. Through entertaining and insightful clips, Michael demonstrates why algorithms deserve our trust: their accountability and their ability to be back tested through different market conditions.
The episode is full of interesting sound clips and passages from bright minds such as Penn Jillette, Leda Braga, Daniel Dennett, Lasse Pedersen, and David Harding.
In this episode of Trend Following Radio:
- The use and misuse of statistics
- Using skepticism to your advantage
- The advantages of algorithmic trading
- Leda Braga on why ‘Black Box’ isn’t a fair term
- Daniel Dennett’s simplifications of algorithms and computing
- Trend following as simple agnostic rules that can easily be passed to a computer
- Efficient market theory failure during surprises
“You want to be a contrarian. You want to be on the other side of the coin. Don’t be with everyone. Stand to the side. That’s where the opportunity is…” – Michael Covel
Mentions & Resources:
- Bleep You, Frank! by Penn Jillette
- Leda Braga
- David Harding
- Intuition Pumps by Daniel Dennett
- Lasse Pedersen
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