Commitment Device

To abstain from the enjoyment, which is in our power, or to seek distant rather than immediate results, are among the most painful exertions of the human will. N. W. Senior

It's physically possible to not take muts.

Yes it is, yet I take them. Not today, calm down.

So I think the idea of a commitment device is a good idea. We need the help, we need the commitment device. First I had the business and trading plan, and still do of course. But that didn't seem to stop the muts.

Maybe I need to re read Mark Douglas, be the casino not the drunk tourist from Hoboken I said.

I read it, I said it, I understood it, but still I take muts.

I tried the Pavlov method, follow the plan get some ice cream.

Still I take muts.

Maybe I don't believe in the plan, that's why I deviate from it?

Except I have stats, the stats don't lie.

I read the stats, still I take muts.

Now we have the very exciting (tongue in cheek) "Days Without a MUT Counter". This is public, public accountability, any failure here will bring public humiliation.

How long did the first string of days last?


Solfest hangs his head in shame.

Maybe I'm just stupid.


I'm a human. (I forget this sometimes)

Humans are stupid.

Now what?

Goldstein talks about getting rid of commitment devices and being disciplined in what ever area we need to be. Learn the better behaviour.
That all sounds good but I think the commitment device is the way to learn the behaviour, change the habit, and if you need (ok make that if I need) any goofy kind of gimmick to do that, so be it.

Of course I could just lie and not change the counter back to zero if I take another mut.

Not sure how to get around that other than to say, who would that benefit.

I guess the answer is it would benefit my present self. However I think I have done enough work in the financial industry to understand that ignoring future self leads to ruin.

I have learned a few things over the years.

Plus if I do take a mut and tell everyone present self gets to write a blog making fun of himself.

Which is always fun.

There I think I'm set.


Anonymous said...

Hi Solfest, very very interesting blog. I'm a beginner trader. I mean, I've just started to read a lot about it, but not everything :-) and doing research on just a few favourite products to get a better 'feel' of them (f.e. crude, that's why a I found you blog :-). I'm curious about one thing. How much of economics/business knowledge is required to be successful? In some books like Market Wizards these TA gurus often says that they are not only looking at the charts but also trying to analyze market/sector/company condition so they are taking fundamental data into consideration too. On the other hand there are some individual traders that seem to be quite smart that says that trading is in fact 90% psychology and just 10% pure numbers (charts). What is your opinion on this matter? (I think you also support this 'mental way' as you post so much about psychology on your blog)

Thanks, B

Solfest said...

It depends on what kind of trading you are doing.

For me day trading is pure TA.

For me my investment portfolio is pure financial statement analysis.

I don't mix the two.

Most of the traders in the Market Wizard books are swing traders and guys like Soros use only fundamental analysis. Others use TA and as you say some use both.

I don't swing trade so I don't know which is better.

Trying to know / guess what the economies of the world are going to do is very difficult if not impossible for most. It requires holding positions for years and waiting to be right.

If you want to build a trading system that is quantifiable I would suggest TA would be the way to go.

Of course I'm stupid so take that under consideration first.

Anonymous said...

@Anon... Solfest is correct. He is stupid.

@Solfest... You need granny-pants (As a great man once wrote http://longandwrong.wordpress.com/2010/03/17/stops-are-pants/ )

I'm losing money here, this justifies my failure to treat your blog with the respect that it deserves :-)

Anonymous said...

I don't care if he's stupid as long as he's making money (-:

Solfest said...

I think "granny pants" may be the anti commitment device.

Solfest said...

Anon I hope you were sticking your tongue out at LW when u said that.

Actually though you shouldn't even care if I'm making money.

I write a blog. That's all you know.

The fact that I've been in this business for a few years means one of three things:

1) I started with a very large account.

2) I have had some modicum of success.

3) I sim trade from prison.

Anonymous said...

Actually I even don't know if its YOU who is writing or answering here. But it doesn't matter, its all very convincing, entertaining and motivating.

Yes indeed, I was sticking my tongue to LW.

Solfest said...

The guards say it's me.

I keep asking them.

They assure me I'm me.

I'm not so sure.

Anonymous said...

@Anon... To be fair, and uncharacteristically complimentary, Solfest talks a lot of sense (for a climate change denying otter doing a ten year stretch).

He will be too shy to point out the excellent "Solfest on Trading" links over on the right, well worth a proper read.

Solfest said...

I feel a hug coming on.

Although I'd prefer a trade.