Intelligent risk is taken when market conditions align with strategy; and executed as intended. Consistent behavior develops awareness for the market and performance subtleties validating alignment and guiding execution.
Automated trading delivers high speed, consistent behavior to optimize strategy and execution. Unfortunately automation dulls investor / trader awareness for the subtleties ensuring continuous improvement. As the Consequences of Moore’s Law1 keep increasing the volume and speed of information; we are tempted to turnover more and more decision-making to machines. Further repressing awareness for the subtleties high returns are dependent upon.
The sweet spot is found when the investor / trader activates an automated execution program based on high sensitivity for market and performance subtleties. The Bracket Tool, executing preset entry and profit / stop-loss orders is the simplest form. Algorithms deployed by quants and high frequency traders are more sophisticated. However, consistent behavior yielding awareness for the subtleties, not the power of automation, is the differentiator responsible for high returns.
Can you define the beliefs, directing the behaviors, validating alignment of market and strategy; and guiding intended execution? Please note functional beliefs and behaviors (analysis, strategy, execution, evaluation, and improvement) are the product of foundational beliefs and behaviors creating high awareness for market and performance subtleties. For example, acceptance of and accountability to the Rules of the Road illustrate how foundational beliefs and behaviors develop awareness for the traffic and performance subtleties directing functional beliefs and behaviors: speed and lane you drive in.
Significant improvement is achieved by learning how the mechanical relationships between beliefs and behaviors at the foundational level; generate awareness for market and performance subtleties optimizing beliefs and behaviors at the functional level. This knowledge inspires, compels, directs, and supports adjustment / improvements making behavior more consistent. Probability feedback necessary to support continuous improvement will be captured, processed, and applied goes way up.
Development accelerates and performance improves as understanding for the mechanical relationships deepens, and foundational beliefs and behaviors develop and align to take advantage of them. The knowledge and feedback gained transitions professionals from a linear, natural learning and improvement progression to an exponential development path. Higher returns are secured as decisions move further ahead of price movement.