The Lindy effect, also referred to as Lindy’s Law started as a joke. Funnily enough, the concept gave mathematicians and statisticians something to think about, arriving at a concept that gives some validity to observations about tech and ideas. It’s theorized that the future life expectancy of non-perishable things, is proportional to their current age. In short, the longer something survives or remains used in the present, the longer its remaining life expectancy. Where it applies, the mortality rate decreases over time.
The distinction for non-perishable things remains significant. We couldn’t use this thinking on people- a five year-old is not likely to die within the next five years, whereas a 70 year old would likely no longer be with us within the next 70 years. The Lindy effect would say these are of equal probability.
Benoit Mandelbrot highlighted a different idea with the same name in his 1982 book, The Fractal Geometry of Nature. I reference his definition for simplicity on the matter. Comedians don’t have a fixed amount of material to spread over their TV appearances, but rather, the more appearances they make, the more future appearances they are predicted to make.
In line with that thinking, the banking industry, present for about a hundred years so far may only have about 100 years left of life without disruption- yet I believe that its time grows shorter with the coming of financial technology disruptions thanks to blockchain. In that regard, cryptocurrency might play on Mandelbrot’s thinking, with its frequent appearances within the past ten years as an indication. People seem to pray for and predict its downfall, but with Bitcoin’s young 14 years of age, expect it for at least another decade or so.
Given the fact it won't be going away anytime soon, I feel compelled to restart my trading journey. As a commitment device, methinks sharing observations and findin's something a smart fella would do!
Enter the textbook that one of my contemporaries believes to be the utmost in learning the Way of speculation: Technical Analysis Using Multiple Timeframes.
Arranging information into near rows to understand, I am somewhat confident in my ability to chunk information for digestible learning. I no longer wanna abet complacency- in anything- learning computing languages, how to invest, which assets in which to invest. A homemade Cobb salad of info, I could eat plenty while remaining in line with virtuous temperance.
The number one job of a trader is that of risk manager. I wonder how many of peers understand this, jumping into coins based off memes... The "job" then, is clear cut: sync your decisions with pride action. One must be able to interpret the "message of the market".
Makes sense you can't control the markets, right? Not to some people... Dad. For these individuals, it's important to remember an inability to accept info contrary to your own beliefs is confirmation bias.
Brian Shannon, the book's author highlights a few points in accordance to discipline:
- Ya gotta accept responsibility for all your actions.
- Flexibility of opinion is imperative. You must understand trades won't always work. Don't be a stubborn parent, not admitting mistakes.
- Successful speculation involves a good dose of cynicism.
- Trading is a business, and in business, you need a plan.
- Remain responsive. Even though you have an idea for what's likely to happen, whatcha see is whatcha get.
- "Listen to the message of the market."
Systems & Discretion
So there are two types of traders. The successful and the- nah. Systems-based traders first quantify market activity and form a rules-centered approach. They hold that using computers removed emotions from the process.
I got the patience to make money off of computers. I love it here.
By contrast, discretionary trading relies on intuition which I might have. Still, I want to program bots to cover both bases. Speaking of which, even picking assets and trading them are two different subjects.
Fundamentals v. Technicals
Fundamentals involve utilizing the various words heard on the street. Nearly anyone can come up with their own schema. By contrast, getting technical could be the answer. After all, the only determinant for trades is price.
- The Lindy effect says, banking's got a 100 years left on the clock. I reckon a little less.
- On the other hand, blockchain might be on the come up. Only a decade in, at least says we got another decade of disruption to come.
- In line with learning, I'm summarizing chapters into blog posts to cement my learning.
- The process of group info into bite-sized pieces is known as chunking.
- They say trading on technicals is like reading tea leaves. I'll admit the craft is like an art, not wizardry nor witchcraft. There's a method. I intend to learn it, among other things.