I Want to be a Machine: A Conversation With an ‘Algo’

The ‘Algo’ in the title being subscriber ‘DT’, who in a previous life was a successful business person and in his current life uses Algorithmic trading strategies to get positive results.  From DT to me at the end of an email inquiring as to why I do not amp up my trading by using more involved strategies, like pairing options with open equity positions…

“Funny thing is, I really look at the trades you throw out there as an added bonus, and not the reason I subscribe- I think your overall analysis is the best out there…..just my .02”

Okay, it’s a not so veiled plug for the NFTRH service with his permission to reproduce his emails.  I admit to you that is certainly part of why I wanted to do this post.  But as you may know, I also like to explore the thoughts and methods of intelligent and/or interesting people; things that stand apart from the crowd.  Anyway, my answer…

“Well here is the thing; in order for me to be good at the macro and other stuff I do, I am almost by definition a simpleton at highly involved trading strategies.  It is almost like another specialty and so much of what I do requires my undivided attention.  I am maxed with that and literally have no more mental capacity or time to apply to trading strategies (which is why I ask subscribers not to automatically do what “this faulty trader” may be doing at any given time).

So it makes me really happy to see that some of my ideas can work out for someone like you who then takes them and applies them to a unique style and has success.  The analysis is the starting point!”

And then he replied with the part that really jazzed me up…

“I think if you could do a computerized version of your thought process, it would be my automated system- you and my algos are pretty in-synch- not the most scientific way to do a calibration, but it matches human input verification with mechanical/automated, which I think is better than either application by themselves in a vacuum…. “

My response…

“In the [late 70’s] the original (and best) edition of Ultravox had a song called “I want to be a Machine”. Maybe I listened to it too much! :-)”

I actually didn’t listen to it that much because the song sucked (IMO) compared to some of their others, but the title “I. WANT. TO. BE. A. MACHINE” is central to how I want to approach the markets.  That is because while being all too human with all too many faults, I decided a long time ago to keep that element out of my market management (and by extension, my market management service) as effectively as possible.

To have an ‘Algo’ write something like that to me is the 2nd highest compliment I think I’ve ever gotten in the market realm.  The 1st was from a Buddhist who long ago told me I “have the soul of an old Monk”.  I don’t believe that is even nearly true, but it was the highest compliment possible in my opinion.  So from one end of the spectrum (soulful humanity) to the other (machine-like discipline) I can die now, fulfilled.  My life and my journey are complete.

Okay, let’s backtrack on that a bit.  I have more rabble to rouse, people and entities (hello MSM) to make fun of and evil things to criticize… and more sound and honest work to do.  I’ll be right and I’ll be wrong.  But I know I am one step ahead of those – who I see daily now – trying to run their decision making through a political meat grinder (watch Twitter or Stocktwits for any length of time and you’ll see legions of day traders who think they can make sense of the market in real time based on inflammatory, knee-jerk inducing media spectacles like Trump in general and this week, the Healthcare vote in particular).  Seriously, many players, if not armed with a method that works consistently, are trying to out think machines (and Algos) and trade every twitch; and doing it through biased lenses.

Dial out to last July when our SPX 2410 target was established (scroll down to the SPX chart).  Trump had just been nominated, but the breakout that established the target had actually taken shape a week before that.  In other words, Trump hysteria had absolutely nothing to do with the target or for that matter, the bullish destiny that it implied.  I am not someone who likes this president.  Some (and far from all) of his would-be policies, maybe, but the guy is a train wreck in progress in my opinion.  The parameters were there and I stuck to them even after someone who I consider dangerous and potentially destructive had become president.

It’s all about parameters folks; those and functioning human brain cells not subject to the cross-talk of bias.  The fact that DT and his Algos, which don’t give a damned about anything going on in the greater social and political spectacles, have been in sync with with my human brain is something very valuable for me to know.  Now, I need to back-shelf it and move forward, which I will do right after I tamp my ego back down.

[edit] Below are responses to this post received from a couple other NFTRH subscribers…

Great thoughts of yours on “I Want to be a Machine: A Conversation With an ‘Algo’.

While DT’s ideas/speculations about the possible merits of combing the two analytical methods, i.e. man and machine certainly have some intellectual interest, his “I think if you could do a computerized version of your thought process …” runs smack dab into today’s reality: Not even IBM’s Watson could do a computerized version of Gary Tanashian’s thought process; close in some respects maybe, but not the whole deal. Personally, I depend on your work coming from your mind (the result of years of work and dedication to learning TA interpretation . . . and effective communication.

Years ago I read the quote “The market makes its own statement” and I have kept that uppermost in my thoughts about market direction/changes and entry/exit timing. I believe that your TA gives the earliest and most trustworthy indications of what the market is saying; and even – and this is where computers get left behind – what the market might be “about to say”. I see it as a hallmark of your messaging consistency, Gary, that you are never definite . . . until you are (and even then, you wisely allow for surprises). That’s special.  –Harold C

***

Having been reading your newsletter for many years, I really enjoyed this latest piece. And, I fully agree with the insights of DT with respect to your talent. Question; if you wrote the newsletter in 2 versions:

version 1:as is, with your excellent and valuable insightful market analysis and “personality related commentary”, just as it is.

version 2 (AUTOMATON VERSION) : omit anything not considered to be 100% market related commentary, such as political opinion, personal commentary, market prognostications driven by personality versus evidence, etc.)

How much shorter or not would version 2 be and would it be any different than an ALGO (lol)?

You’ve come a long way! Congrats. –Rich K

Answer:  It would certainly be easier to read because the pictures and data would tell the story and I’d just interpret.  I am sure an Algo would be cleaner though, as editorial comments and sometimes wise assery seem to be hard coded into my output.

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