Information Overload

I am surprised with the difference in the way we react to essentially the same set of problems given a change in the contextual framework. For instance as in life, in trading/investing too one is faced with this problem of taking decisions in an ever changing environment and in the face of incomplete information.

We have learned to continue to live our daily lives and go through our daily routines despite the inherent uncertainties. We have, as a race, learned to live and perform within the significant uncertainty that is life without letting worry paralyse our decision making process. Taking decisions in life in the face of incomplete information and in the face of uncertainty is almost second nature for us. We do not even give this fact a second thought.

However as traders/investors, we have not learned to cut out the noise from the signal. We have not learnt the ability to decide easily on a course of action in the face of incomplete information. This leads to the continous clamor for information. The clamor for information in the belief that there exists somewhere that elusive piece of news that can lead to investing/trading success.

We have not learned to live with the fact that information is plentiful but being able to discern the important from the unimportant is impossible because the market is dynamic and changes its focus regularly. I, for example, keep worrying about everything from the Global Macro factors like the Euro, US economy and the Sovereign Debt crisis to the micro factors like lack of governance, distinct lack of direction in the Indian polity etc. I have yet not learned to simply follow a tried and tested system which is robust enough to handle most situations. By system, I am not limiting myself to a trading system. Even an investor who has a reasonably quantifiable process for stock selection and portfolio management is following a system.

In life, most of us manage to block out any information which is not relevant to our daily living. As traders/investors we seek out information in the belief that more information equates to better investment performance. Is it really possible that our ability to perform improves with more information or is it more likely that the greater the information the more scrambled the decision making process?

I would guess the later. So I continue to trade a system. I am long on my STT and LTT. The levels where I turn short are given below.

Current Position: STT Long LTT Long

Probable trades: STT: Cut long and go short < 5546

LTT: Cut Long and go short < 5446