Thread by @MacroOps

Skimming through some old notes from Mallaby's "More Money Than God" & love this bit view on investor psychology from Michael Marcus and the CC crew:

"People form opinions at their own pace and in their own way; the notion that new information could be instantly processed... /1

"was one of those ivory-tower assumptions that had little to do with reality. This gradual absorption of information by investors explained why markets moved in trends, as new developments were gradually digested. But market psychology was more subtle than that; /2

"there were times when investors' reactions accelerated. Human beings do not simply make forward-looking judgments about markets, the CC traders recognized; they react to recent experiences" -- That last bit is very key

4/ @IAmAdamRobinson has said something similar, which is that a trend can be looked at through the lens of the diffusion of innovations or the spreading of ideas, since that's all a trend is, "It's the spread of an idea".

5/ A KEY thing to understand about markets and narratives is that narratives are backward-looking... They exist to explain what's already occurred, to rationalize historical price action rather than form hypotheses about the future.

Here's a graph I made to illustrate the point.

6/ Price drives narratives, not the other way around. Getting caught up in popular narratives may get you a lot of followers on twitter but it'll lose you money in markets.

7/ There's a reason why the best trades are almost ALWAYS the toughest to put on. It's because they're counterintuitive. On the surface, they make NO SENSE. That's why the following from Adam is so important to Grok.

8/ One of my all-time favorite trading quotes is from Bruce Kovner. He said "One of the jobs of a good trader is to imagine alternative scenarios. I try to form many different mental pictures of what the world should be like and wait for one of them to be confirmed....

9/ "U keep trying them on one at a time. Inevitably, most of these pictures will turn out to be wrong—that is, only a few elements of the picture may prove correct. But then, all of a sudden, you will find that in one picture, 9 out of 10 elements click...

10/ "That scenario then becomes your image of the world reality."

That is gold.

Trading and markets are filled with paradoxes where many of the most important things are counterintuitive to the extreme.

11/ For instance, to succeed in this game you have to believe that you can beat thousands of others who are smarter, better capitalized, better informed etc.. than you.
While at the same time, you have to remain INCREDIBLY humble if you want any chance at succeeding.

12/ Popper's wisdom applies, "Our knowledge can only finite, while our ignorance must necessarily be infinite."

This is why you need to be wary of those who practice what I call "Vision Macro". These are the people that make bold (usually bearish) predictions about the future.

13/ That approach is great for selling newsletters but VERY poor for making returns. Rather, u need to embrace ur fallibility, like Soros who said "The Secret to my success is that I’m always wrong. I’m ALWAYS wrong. And I try to correct my mistakes."

14/ Most importantly, idea generation is like 10% of the game. Entries/setups are a dime a dozen. The REAL money is made by having a definable edge & a process that allows you to execute on that edge over and over. It's the trade/risk management and position sizing that pays you

15/ This is what the OG's at Commodity Corps knew better than anyone else. It's partly why the shop produced so many of the greats. They focused in on the mundane but critically important things that everybody else glossed over.
/fin
macro-ops.com/teachings-from…