Thin-slicing can be advantageous

...continued from yesterday

Thin-slicing by itself is neither good nor bad. Some applications of thin-slicing prove to be advantageous.

Thin-slicing proved to be advantageous in the Millenium Challenge, the most expensive war games in history. You can read more about it at http://en.wikipedia.org/wiki/Millennium_Challenge_2002.

The game pitted the Blue Team against the Red Team.

Blue Team was lavished with the best equipment, the best technology and the best access to information. Blue Team was run with a supercilious management style.

On the other side, Red Team was given basic equipment, inferior technology and inferior access to information. Red Team was run with an ad-hoc management style.

The Red Team quickly and decisively defeated the Blue Team. After that, the people in charge of the war game revised the rules so that Red Team was prohibited from doing what they had done to win. Naturally, with the game “fixed”, Blue Team won.

The point of round one where Red Team won is that having more information (thanks to ultra- sophisticated equipment, ultra-sophisticated management methods and ultra-sophisticated technology) actually hampered them in war-like situations, such as trading. It showed that primitive robust methods are actually superior.

Applying this to trading, the implication is that having more information (thanks to ultra- sophisticated equipment, ultra-sophisticated management methods and ultra-sophisticated technology) actually hampers your profitability. And that primitive robust methods are actually superior.

In trading, more information comes in the form of multiple fundamental reports, mutiple computer monitors, superfast order entry software, fancy price-volume indicators, and multiple news services and chat forums running during trading hours. The “information advantage” actually puts you at a disadvantage compared to using primitive robust methods, such as just viewing a simple bar chart with no indicators.

continued tomorrow ...

Copyright 2007 Raymond T. Lee. All rights reserved.
Leisurely e-Mini Futures Trading
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