Wednesday, June 1, 2011

Time Span vs Attention Span


We have so much information to process our minds have developed short-cuts to live by. When we come across a familiar situation, we analyze it quickly and don't require any extra thought to come up with a solution. The more times we run across an experience the faster we process it. Only in coming into a unique experience or surroundings do we give it our full attention and develop a novel approach.

I want to propose a mental experiment. Write down your basic trading rules/assumptions onto a piece of paper. For instance, I am a swing trader. My rules begin with the following:
1) 1 day to 3 month swing trading

2) ....

3) ....

4) ....
etc.
The experiment is to Think Differently

Wikepedia writes - "Opposite Day, also known as Opposites Day, is May 25th of every year. It is a word game where speech is modified so that meaning is inverted. Once Opposite Day is declared, statements mean the opposite of what they usually mean."  Think of this as "Opposite Day". For each item think of an antithesis of the written statement. It's opposite or divergent view.
1) 1 day to 3 month swing trading
[antithesis]
2) ....
[antithesis]
3) ....
[antithesis]
4) ....
[antithesis]
etc.
So for number #1 - We all want to buy low and sell high. The trading range is a time period which can very in infinite ways and steps. The random walk of a stock can consolidate, capitulate or even be in a parabolic bubble. Why am I using a "Time Span"?  Why shouldn't it be an "Attention Span"? Excitement & attention is what makes a stock rise (or fall). The low to the high peak range is achieved when something generates positive (negative) attention to a stock. Can sentiment be identified, codified and measured from external sources?
  • press releases
  • news
  • earnings, analyst reports and filings
  • articles, politics
  • branding
  • controversy
  • social media hype
  • your neighbor, peers, broker recommendation
  • Bubbles flourish in periods of “new era” thinking 
  • many more reasons
A longer range period is achieved when attention is given to an entire sector.

Go to Item number #2 - Repeat

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