Col.John Boyd of US Air Force was one of the most gifted and effective fighter pilot of all time. John Boyd understood the challenges of time pressured
decision making and developed a decision making framework for combat situations.
It is known as OODA Loop. The acronym OODA stands for Observe, Orient, Decide
and Act.
The application of OODA is not restricted to warfare alone.
It is applicable to Trading as well. Aim of OODA is to act fast. The right way
is to decide and act fast so that more time can spend to observe and orient.
Observe. First step is to observe what is happening at the
moment. Gathering relevant information happens during this stage. Almost always,
under time pressure, traders forget to pay attention to the details. Better to
simplify and avoid observing irrelevant information.
Orient. Once we gather the relevant information, the next
step is to process it and position ourselves for a decision. Orientation will
depend upon our beliefs and mental model. Observation and orientation will
decide our trading edge. We have to ensure that our methods are based on the
reality and not on illusions.
Decide. The next step is to decide a course of action. Depending
on the gathered information make a decision to act.
Act. This is the final stage. Implement the decision. Once a
decision is taken do not second guess or hesitate. Simply take action. Go back
to step one and observe. Cycle through the OODA Loop.
Finally,do not hesitate to use the ejection lever if
something goes wrong. Ensure survival. We
need to trade another day.
Dear ST,
ReplyDeleteThis is one of the best structured blog on trading I have ever seen.
Keep it up..
sreyO,
ReplyDeleteThanks
ST
ReplyDeleteExcellent post!
In electronics, this is basically a negative feedback loop.
Thanks n regards,
sorry... forgot to post a wiki link on this...
ReplyDeletehttp://en.wikipedia.org/wiki/Negative_feedback
Thanks and have a good trading week ahead.
SS
ReplyDeleteThanks
ST
Such concept sharp the trading skills and gives required edge.I like most.
ReplyDeleteTrading is " Neural works " of smart money.One should be smart and well prepared with habitual trade set up practiced well in past.Market mostly will not give time to think much.But one should remember
"Hesitation kills best trades "
Lovely post ST....
ReplyDeleteMatches with the basic structure of a technical trader.
Thanks
Keep Going ST, Moving towards Precision trading...Excellent.
ReplyDelete@Harish
ReplyDelete@Anurag
@Capt. Premlal
Thanks
ST