Don't think that rat-trader is more clever than human! In fact they are less clever than a human and this is their advantage. There was an experiment with rats in labyrinth . 60% of time food was on the left site of the labyrinth. Rat has figured out that he gets more food at the left side. And no matter what, rat would always go to the left side. As result rat was successful 60% of the time. Rat didn't try to resolve theory of labyrinth and try to figure the mess. Instead he has accepted unavoidable uncertainty of food rewarding.
The same experiment is made with Yale students. Unlike the rat, students was trying to develop model which predict possible place for food to show up. First they have made predictions and after, they have learned from their mistakes. The problem was in a fact that there was nothing predictable. Students wanted better results than 60% and they have end up with results round 50%.
If we look at this example we can notice the similar behavior with the price.
TRADING IS SIMPLE!
- price goes UP or DOWN
- nobody knows what will happen next.
- cut your losses and let the profit run.
- reason of your entry into the position ain't related with outcome!
- you can control your risk but you can't your reward, reward is on luck!
- you must know when to claim your reward!
If you take in consideration that rat does not know nothing about charts and analysis. You can conclude that you don't need charts at all. Just watch the price and configure algorithm. If you trade by price only then you will look in front of you and not backward. You have heard that lots of traders trade backward. Like you drive a car and all time you look in the mirror.
If you turn of your charts and start to watch price itself you will find price moving algorithm. Price moving algorithm is a changeable concept. So every time when you approach the market you must watch the price itself to find algorithm.
Rule for trading this algorithm is: BUY dips and sell highs and don't be greedy.
We can call this kind of trading, trading on the edge!
Warning: Don't trade the market at certain times. For more information check TIME ANALYSIS!
Rats are being trained to become superior traders in the financial markets.
Using methodology in accordance with well-established animal training techniques, subjects learn to recognize pattens in historical stock and futures data as well as generating trading signals.
Lehman Trading Gold Futures
Rat trader at work!
Rat trading box.
