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Feedback: “Psychology is not a science, an art, a philosophy nor a religion…”

An excerpt from Trend Following:

In 1995, psychologist Daniel Goleman published his best-seller Emotional Intelligence, a powerful case for broadening the meaning of intelligence to include our emotions. Drawing on brain and behavioral research, Goleman demonstrated why people with high IQs often flounder, while people with modest IQs often do extremely well. The factors that influence how well we do in life include self-awareness, self-discipline, intuition, empathy, and an ability to enter the flow of life, character traits most traders would not consider particularly useful for garnering profits from the markets.

Being self-aware also means understanding what you want out of life. You know what your goals and values are and you are able to stick to them. For instance, if you’re offered a high-paying job that doesn’t square with your values or your long-term goals, you can turn it down promptly and without regret. If one of your employees breaches corporate ethics, you deal with it instead of either ignoring it or worse yet making a half-hearted response because you pretend to yourself it won’t happen again.

Emotional self-control makes anyone more productive. However, Goleman is not saying we should repress our feelings of anxiety, fear, anger, or sadness. We must acknowledge and understand our emotions for what they are. Like animals, biological impulses drive our emotions. There is no way to escape them, but we can learn to self-regulate our feelings and, in so doing, manage them. Self-regulation is the ongoing inner conversation that emotionally intelligent engage in to be free from being prisoners of their feelings. If we are able to engage in such a conversation, we still feel bad moods and emotional impulses just as everyone else does, but we can learn to control them and even to channel them in useful ways.

A trend follower’s ability to delay gratification, stifle impulsiveness, and shake off the market’s inevitable setbacks and upsets, makes him not only a successful trader, but also a leader. Goleman found that effective leaders all had a high degree of emotional intelligence along with the relevant IQ and technical skills. While other “threshold capabilities” were entry-level requirements for executive positions, emotional intelligence was the “sine qua non” of leadership. Without emotional intelligence, someone can have superior training, an incisive and analytical mind, and infinite creativity, but still won’t make a great leader.

Now consider recent feedback to me in email:

Psychology is not a science, an art, a philosophy nor a religion. Why would I want to waste my time with people whose subject is completely unworkable?.

Yours truly,
[Name], a satisfied Scientologist for 48 years.

I can understand that. If I was in a cult I would say the same.

Note: Take a listen to some of the best minds in the field of psychology here.

Don't drink the cult...
Don’t drink the cult…

Ep. 366: The Statistical Mindset with Michael Covel on Trend Following Radio

The Statistical Mindset with Michael Covel on Trend Following Radio
The Statistical Mindset with Michael Covel on Trend Following Radio

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There is often misunderstanding among the general public when it comes to probability and risk. For example, 20% of Americans believe they are in the top 1% of income earners, or are soon to be there. This is, of course, statistically impossible.

Statistical thinking needs to have a bigger focus in our society, especially since the amount of data we have to deal with on a daily basis is constantly increasing. We need systems to help us sift through the noise.

Today’s episode is a selection of excerpts from some of the brightest minds of today and yesterday, and their takes on systematic and statistical thinking. Michael Covel provides the commentary. Though this is not strictly a trend following episode, all the material is very much applicable and relevant for anyone in trading or business.

From Penn Jillette (of Penn & Teller) to Gerd Gigerenzer, to Daniel Dennett, to Richard Feynman, this episode is permeated with wisdom to help you cultivate a trend following mindset.

In this episode of Trend Following Radio:

  • Having a foundation, a system to get through the noise
  • Developing a statistical mindset
  • Understanding risk and knowing how to deal with it
  • Getting “under the hood” of any trading system
  • Richard Feynman’s lecture on computer heuristics
  • What computer heuristics have to do with systems trading
  • A trait that geniuses have in common
  • The importance of isolation and concentration in learning

“The most important thing is to feel about things you should feel about, and think about things you should think about.” – Penn Jillette

Mentions & Resources:

Listen to this episode:

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Ep. 322: Sophia Roosth Interview with Michael Covel on Trend Following Radio

Sophia Roosth
Sophia Roosth

Michael Covel speaks with Sophia Roosth on today’s podcast. Roosth is a Harvard professor that Covel first heard quoted on DNA privacy from Davos. Roosth’s research focuses on the twentieth and twenty-first century life sciences. Her first book, based on four years of ethnographic fieldwork, examines how the life sciences are changing at a moment when researchers build new biological systems in order to investigate how biology works. In this work, Roosth asks what happens to “life” as a conceptual category when experimentation and fabrication converge. Covel and Roosth discuss the Davos event; what becomes of privacy in a moment of internet surveillance; having more information out there as a way to control privacy; biological privacy, and whether our DNA is going down a path where it’s a lot more public; discrimination based on genome; genetic McCarthyism; somatic transfer and cloning; the story of Chance the bull; the idea of de-extinction; the ethics of cloning; molecular gastronomy and world hunger.

Listen to this episode:

How I Look At The Markets

The markets are a science. Plain and simple. Some like to look at fundamentals and guess what will happen next. I like to look at the numbers. The facts. The only thing you can trust. Billion dollar hedge fund manager David Harding views the markets similarly:

Our approach to markets is a science. It is an unpublished science, but it is a real one. You would have thick leather-bound volumes of papers on it if there were a willingness to “open the kimono,” as the horrible modern expression has it. The process of trading our system is like repeatedly drawing different colored balls from the statistician’s apocryphal bag. As we draw out a ball it becomes part of the track record, and we put it back in the bag, but there is no guarantee that the balls will come out in the same order in the future.

Trend following is speculation in its purest form–find an edge and exploit it consistently over time. That attitude is critical for any entrepreneurial success. Throw the lottery mentality away. Forget the one hit wonder luck the press propagates to the masses of lemmings. Learn the real way to profit that goes against buy and hold (hope).

Learn to be a trend following trader.
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