Information Overload – An Integral Approach

In today’s society, we are bombarded with information. This is no different in the trading world.  Sqawk boxes, CNBC, Bloomberg, yahoo Finance the list goes on.  The world is so interconnected it’s difficult to spot why this setup works now and why it won’t work in the future.  For example knowing that the relative strength between the 10-year US bond futures was not able to make a new high in 2008 while the market did make a new high, signaled a top, however, this no longer works.

Integral theory is a beast if you want it to be and to mentally check off the 5 aspects is cumbersome, but I believe quadrants are the most useful when dealing with a lot of information with 4 very simple questions based on the philosophy of the quadrants.

  • Is this information going to change the behavior of the stock? (upper-right)
  • Is this information change the way WE as a collective view this stock? What are other people thinking potentially if they were already long or already short? (lower-right)
  • Is this information related to the entire sector? (Lower-right)
  • Will this change the stocks internal unique character? For example, will it trade less or more. (upper-left)

Information overload is a real issue.  Sometimes we get a piece of information such as, “Buy out rumor on TIF,” we rush to pull up the ticker and notice it’s spiking quickly, but if you take the time to answer the above 4 questions you’ll see how the answers may not invoke a buy.



Integral Theory – Types

What type of trader are you? Long-term, multiday swing, intra-day, or ultra short term scalping?  There are many types of traders out there.  A more common frame of typing would be astrology.  Are you a cancer, libra, capicorn, etc.  These don’t necessarily tell you specifics about who or what you do but in society, but we generally enjoy typing ourselves.

How does typing yourself effect your trading?  When we categorize ourselves into boxes such as, “I’m a scalper,” or “I’m a swing trader.”  These conceptions put the focus on an ideology and not on your setups.  Let’s illustrate with an example.  Marvin always buys the 3 bar pull back on the 5 minute chart he watches daily.  However, the next day he see’s the exact same setup on a larger time frame but refuses to take this trade because he is a “day trader.”  It’s these ideologies that can make a trader focus on the wrong aspect of trading.

It’s not who you are (day trader, swing trader, fundamental trader) it’s what you do.  Why do you take these setups, what candle patterns, fundamentals are you looking for and how do you repeat them.  When you begin typing yourself; being a “day trader” filters trades rather than letting you setups dictate the filters.

Integral Theory – States

Integral theory believes we enter different states of awareness, of consciousness, etc throughout any given day.   Have you ever been unable to break an angry mood? Your state was angry.  Have you ever been highly irrational for a long time? Your state was irrational.  Have you ever fell in love & were unable to fall out of it for a long time? Your state was in love.

States greatly effect the way we trade ever single day.  Author Denise Shull’s book Market Mind Games is essentially a book about emotional / psychology states.  Her book can be summarized as follows.  Be aware of your emotional context (state) it will greatly effect your trading decisions.  She’s correct.

This is a very basic overview of how states can effect you during trading.  Denise suggests writing down your emotional state as your are trading such as “I”m afraid to take this trade” or “If I lose on this trade I’m going to be very angry with myself.”  I added to this methodology by taking it a step further and after the bell has rung to go back and ask. What makes me afraid? or IfIi become angry with myself what would happen?


Integral Theory – Levels of development in trading

To again, continue my series on how I use integral theory to trade the stock market we now move onto levels of development on each of the lines I discussed.

This is the piece of Ken Wilber’s theory that he “borrowed” a lot from other traditions.  Personally, I think this is one of the coolest aspects of his theories.  The book Integral Psychology does a great job mapping out how all these different theories of development are talking about the same thing just at difference stages in life.  I highly recommend the book.

How do development lines work?  If you ever heard of Freud’s psychosexual stages of development that is a developmental line.  Another example is Piaget’s stages of cognitive development.  The most popular set of development stages within the integral framework tends to be spiral dynamics.  This is metaset, in my opinion, of development that can be applied to any line.  I’ll illustrate an example below.

The Line of development will be pattern recognition.  The development stages of pattern recognition could be interpreted as follows.

Beige – Instinctive / survivalist: Reading books on technical analyse & finding patterns that match exactly what you have read.

Purple – Magical / Animistic: Believing you see the patterns in everything.  The street lights form a double top and every time frame you look at hold exceptionally strong cup & handles, for example.  You find a “holy grail” of patterns

Red – Impulsive / Egocentric:   The patterns no longer work and you are angry. You find failing example after failing example.  The belief in the “holy grail” has died.

Blue – Purposeful / Authoritarian: You seek more education believing someone must have the “holy grail.”  You take this person or educational doctrine word for word.  You start to relive the “holy grail” experience that you originally had but it is now done with a stronger authority figure.

Orange – Achievist / strategic : Acting in your own self-interest.  “This guy doesn’t know what he’s talking about but I do.”  This is where you may begin to turn heavily towards statistics to validate your patterns and see how often they do work.  You will turn to more scientific methods.  [Side note: this orange phased is theorized to have only begun 300 years ago]

Green – Communitarian / Egalitarian:  Seek peace with self & others.  You now realize you know what you don’t know and don’t know that which you don’t know.  You have accepted the idea patterns work and patterns fail. That there is no holy grail.  You may even begin to share your knowledge with others.

A picture below should help bring these ideas together.  Remember moving on to the next level does NOT mean you are no longer part of the lower levels.  As you transcend the previous level you include you! You never disregard the previous levels.  Even though you may recognize patterns at a “Green” level of development, it doesn’t mean that “beige” is no longer a part of you.