The negative path. The concept comes from The Greeks and Romans and was first applied by theologians in their pursuit of a definition of God. We cannot say what God is, we can only say what God is not. A lofty concept. How about Michelangelo. When asked how he creates such works as The David he replied “It’s simple. I remove everything that is not David.”
Let’s be honest. We are not sure really what makes us great traders, what makes us successful business men and women. We may be able to call out a few actions or moments where we acted in a way that was correct for the situation but it’s unlikely that we are able to pin point any real variables that make us who we are. This is why teaching or transferring attributes is so difficult, maybe impossible.
Have you ever noticed the absence of pain?
As I sit here thinking about this, I feel no pain. A three hour bike ride in preparation for a difficult race next month and a two hour scramble up a boulder field this afternoon with three wild kids, I feel a fair amount of tiredness, but I do not feel pain.
In this case, I only notice because of the expectation of pain. How about on a day where there is no expectation of pain? A day you just feel “fine”. Would I notice?
It’s likely that I wouldn’t.
Tell me the common variable in the following set of numbers : 387, 896, 378, 098, 189, 864, 548. Don’t continue until you’ve guessed the shared variable. It’s simpler then you think. The number 8 is featured in all of them. Let’s look at another row of numbers. 874, 092, 421, 785, 678, 802, 846. Again, don’t go on until you’ve looked hard at the numbers and have a guess as to the common variable. This one if more difficult. Take you time. The answer : None of the numbers have the number 3 in them.
What can we learn?
What we can understand via this simple test above (not invented by me) is that humans have a more difficult time detecting what is missing then what is present. Have you ever gone on a road trip and an hour into the drive realize you’ve forgotten an obvious but critical item? A pillow perhaps.
Humans like to find answers in doing more. Want to get healthy, add this to your diet. What to get smart, take this course or read this book. Why? Because we are naturally additive thinkers. It is far more easier to get a person to consider doing then not doing.
Example, If I told you that looking at daily high/low/mid levels in context of overall trend and looking for patterns could offer you new and simple insight to your trading methods, you would be happy to hear that. Actually taking action on it is another thing all together. However, if I told you that not doing something would have a greater effect on your PnL curve, you would likely be less inclined to believe me, no matter how true it is. Not trading the first 30 minutes of a session or not trading after the first 2 hours of the session, for example, while good advice would be far less palatable.
Via Negativa
What if I told you that an extreme reduction in action, planning, analyzing and systematic development was perhaps more valuable to you and your account value? What if I said you don’t need more information, more knowledge, more market insight but simply the removal of everything that is not David?
Finding David
Our natural instinct is to add. Non-artistic people tend to think that an artist has the whole final product in their head before they start. I promise you, we do not. We know more about what we do not want then what we do want. Yes, there is a sense of the final product, a vision, a feeling and loads of reference but there is no clear picture.
So it is in markets. It is enough to simply know who you do not want to be.
Down to brass tacks. A bad trader will : Add to losers – take sub par setups – overtrade out of boredom – seek more certainty on what will happen – oversize poor setups – undersize good setups – lack follow through – cut winners early – let losers run – trade out of fear and fomo.
Simply avoiding these on a naked chart is more then enough to put you into an elite category. Eliminate the downside, the thinking errors, and the upside will take care of itself. This is all we need to know.
"Charlie and I have not learned to solve difficult business problems. What we have learned is to avoid them," - Warren Buffet
Welcome to via negativa.