Data and information are like air. It is everywhere and we need it to survive. Just like in every breathe we take we have a chance to do what we want with it, data is no different. Anyone can manipulate any data and make it say whatever they want. The tools we have today to measure are better than they every have been but it is making it less science and more art. I don’t think it will always be that way but for now it is. After all we are still dealing with humans. Complexity and mass has outran our ability to understand it.
What you can’t manipulate.
A chart is a recording device but it does not always tell a story. Because it is a recording device it cannot be manipulated. Let me clarify it. A market can be manipulated where the market went cannot be. And yes there are dark pools but there has always been some form of this.
What has frustrated me about commentary around data is people think the number is more important than what the market did. To some extent I understand that most people are creating content vs relying on it to make them money. The important part for the latter group is not the data, it is how people acted that is important.
It is not that people act much differently it is whether they are participating. Let me say that again, it is much easier to know how they are going to to react than if they are there at all before the release. By seeing how the market moves when data is released you can tell if they are participating. In my opinion, there is not many different players right now. In that case the big players can easily and cheaply go along with their agenda. I believe their agenda is to attract participants by higher prices.
If someone cuts us off in traffic it is easier for us to understand if we believe they have something against us than that they did it randomly. That we somehow matter to a stranger. Chances are they did it randomly. They were in a hurry, distracted, or don’t care. The same is true about the market. At times it moves with “reason” but the correlation between reason and market moves is loose, very loose for right now. The more participants the more likely they are to react in a reasonable way.
It is hard for a new trader to understand that they can lose money from the random moves. But what they do not understand is that what they may lose in money they gain knowledge. An experienced trader knows how to make money from the random moves. That is the difference.
Be careful with what you do with the air you breathe. Data has made confirmation bias easier than it ever has been. This is because it is so much cheaper to produce than it every has been. I can watch the same information being presented by two different networks and feel a different way. As a trader you have to be able to argue both sides at the same time, to create scenarios, and let the market show you who is right.
Now the question for me and something I will have to confront in the future when things are rational again is if I can ever believe in it again. It will not be easy for sure but nothing speeds up the adjustment like having money at risk.
We would really appreciate your feedback, if you like, hate, or think we are full of crap. Please leave a comment, a voice mail (312) 725-9121, email info @ traderhabits (dot) com or twitter, stocktwits, youtube and facebook. Subscribe to Traderhabits by email or to newsletter.