Integral Theory Lines of Development in trading

To continue my series of how I use integral theory to trade the markets we now move onto lines.

Lines define what skills we develop.  For instance, there is a mathematical line of development, there is a pattern recognition line of development.  These skills have varying levels from the novice to the expert, but we will get to that in a future post.

There are a couple core lines I believe are truly necessary for the development of all traders.

  • Mathematics
    • Why: The ability to analyze your own trading data, calculate company fundamentals, understanding the greeks of options and many others.
  • Pattern Cognition
    • Why:  Being able to spot patterns is critical for being a successful trader.  This extend far beyond technical analysis but also into the motifs that society indulges in to create Bull & Bear markets.
  • Patients / Emotional intelligence
    • Why: The market is unforgiving it will require you to keep your biology from overthrowing your mind with the chemical cocktail it will throw at you on a daily basis.

These are what I believe to be the core line of development that are needed to be a good trader. In future posts, I will write about how to develop them.

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Daily Trading Goal: Choose Your Thoughts

Today’s Daily Trading Goal focuses on how to choose your thoughts.  Thoughts effect your biology and your biology greatly effects your ability to trade through hormones.   Which thoughts you choose to pay attention to is critical.  Listen & choose to think good thoughts.

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How I use integral theory to trade the markets

Integral theory is a beast.  You can read Ken Wilber‘s works over a lifetime only to come back to read them again and realize how much you missed.  My friends who introduced me to the theory always found great ways to answer my practical application questions from this theoretical model.  This and other posts will be my attempt to do the same for stock market trading.

As I discussed in a previous post.  Quadrants a great way to know your current perspective on things.  But how do we use the other 4 tenants?

Quadrants: Great for perspective.  Figuring out where your thoughts are and most importantly where other people’s thoughts may be as well.  This is simply a matter of perspective taking methodically.

States:  Are you angry? Stressed? Joyful? Irrationally exuberant?  In Flow?  This is the current state of your being. What’s coloring your trading ideas.  Maybe even confirmation bias.

Lines:  These are the skills people obtain throughout life. Relevant to trading I see pattern recognition, math, probability and high social IQ as skills worth developing for this business.

Levels:  Each of these skills will have levels that will build on the next.  There is no stagnation unless you choose.

Types: Gemini or Capricorn? OCD or free spirited?  How do you type yourself as a trader? Do you believe the hype that you can put in 2 hours of work a day and walk away a millionaire? Do you believe it takes hard work and practice?  This is typing yourself.  It is also called priming in the field of psychology.

I will write about each of these in more detail in future posts.

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Daily Trading Goal – Caught in Your Own Thinking

Today’s daily trading goal is to stop getting caught up in your thinking.  In psychology,  one aspect of this is the confirmation bias.  Where view almost all information as confirming our original thoughts.  Stop this by wearing aware it exists.  Be mindful of your thoughts.

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Integral Theory from a Traders View

Ken Wilber is the famous, possibly infamous, creator of integral theory.  The theory in brief (I can’t stress that enough) posits 5 major tenants:  Lines, Levels, Types, States, and Quadrants.  We’ll be looking at quadrants in this post.

Each quadrant represents an internal (psychological) or external (behavioral) on an individual or collective (societal) level.  As I trader I use these quadrants as a tool to check my perspective.

Upper Left: What am I thinking feeling, expecting from this stock?

Bottom Left: What are other people thinking, feeling, expecting from this stock?

Upper Right: How is the stock moving? What are the patterns and trend?

Bottom Right: What is the sector doing, the collective?

As complicated as integral theory can get. One can typically break it down for practical everyday use.  Metatheories are often good for that. 🙂

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Lesson of the Week – Perseverance

Nothing says failure like giving up.  This week, while optimizing and running walk-forward tests on upwards of 12 stocks with 5 tests each, I was confronted with this FAILED almost every morning I woke up.

To wake up every morning seeing the word FAILED in bold capital letters plastered across the screen can weaken your resolve that it’s even possible to make money in the market using automated strategies.  After a few days, I saw PASSED! I was ecstatic! 

I could feel the rush of dopamine flood my brain like a well trained rat pushing that level for a fix.  Of course, the moment was fleeting and further degraded as the next FAILED came up again and again.

I was soon reminded of Carel Dweck’s groundbreaking research in Mind Set.  Focus on the process, the growth, what you learned NOT the outcome.  I supposed that’s a beautiful element of being human: how quickly we can be overtaken by our ancestral brains.  I’m not a zen monk and I won’t pretend that seeing FAILED doesn’t bother me but refocusing on the process made the work less emotionally draining.

Focus on the process, not the outcome.

What was my process?  :

  1. Find stocks that “look” like they trend
  2. Run optimizations with at least 10k bars in each & 1 year worth of data
  3. Run walk forward analysis
  4. Log it
  5. Live paper money test for PASSED

The process is productive, thinking about FAILED is not.  Keep persevering, focus on the process.

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