Variant Perception And Problem Solving

Whenever, you take a position in a given instrument you are by definition doing something that is different from someone else in the same circumstances. Consider the chart below of Apple.

I could make the compelling case that the stock has broken out. It has made a new high, broken out of resistance and has done so on increasing volume. So my decision would be to buy the stock seems logical and inevitable. However, the person selling the stock to me has a different view. Something has compelled them to act in the exact opposite manner to me. I could rationalise their decision in any number of ways. They could have other commitments to meet, they may have entered the stock at $225 and be profit taking or I could simply regard them as being stupid.

Irrespective of their reasoning, they have taken an action that is different to mine. Their would view is different to mine and they have acted according to that world view. When looking at individual trades it is worth looking at it through the eyes of someone else since this enables you to understand and plan for all eventualities. Unfortunately, as traders we often focus on the binary outcome of each individual trade and then discount what may come after that. This discounting of what may come next in some instances leads to us simply hopping from one position to the next without any form of cohesive narrative behind what we are doing.

The video below is related to this notion of different ways of solving problem and shows how a different world view can be used to solve a given problem.