Tacit Knowledge

Over the years many attempts have been made to classify knowledge. These have resulted in many classifications. To make it simple there are two types of knowledge. Explicit Knowledge and Tacit Knowledge. In reality, all knowledge is a mixture of tacit and explicit elements rather than being one or the other.

Explicit knowledge is formal and codified. This can be written down, transmitted, and understood by a recipient. Such knowledge can be stored, retrieved, modified and discarded easily. Explicit knowledge can be taught very easily.

On the other hand Tacit Knowledge, sometimes referred to as “Know-How”, is intuitive, hard to define and largely experience based.. It is often context dependent and personal. It is very difficult to communicate and transmit.

The art of trading is a complex mixture of explicit and tacit knowledge. All the successful traders heavily rely upon their tacit Knowledge. It is impossible to convey this intuitive understanding gathered from experience and practice to a learner.

We will remain at a low point of the learning curve with limited tacit Knowledge development. Tacit knowledge is developed by facing challenges to transform ideas into practice. Without continued challenges our development plateaus

Most of the struggling traders focus only on the explicit part and ignore the tacit side. They may probably get “Reputation beyond repute” and win “Thanks” in trading forums but will never succeed as traders.

28032013

Usually i do not trade on expiry days. On such days Market is not in control of day traders and DPs will not work efficiently. Nifty opened within previous day range . later it broke PDL. There was no opportunity to short. Later price break above PDL. But  PDC and then HOD was resisting. BOF of PDL gave a long. Most probably those who entered here might have shaken out  missing the move
@adhi
An up trend is higher pivot highs and higher pivot lows. But crack of any  pivot low is not considered as trend change. Most traders consider the crack of a swing low leading to the highest high as trend change. Here the market in uptrend. A-B impulse move. B-C pull back. C-D impulse wave fail to exceed swing pivot B. Market falls Crack of pivot C is not counted as a trend change. Crack of A is a trend change as it is the swing low leading to the highest high pivot B. Pivot A is a MSP. Hope it is clear.

26032013

Nifty opened below PDL. I was looking to short. First two candles acted as IR. Did not short as price did not break the MC. Did not attempt a long as it was a chop area previous day and PDC &MSP was very close. Took two trades BOF of range high and BOF of PDL/TST of Range Low.These trades did not move as expected.

25032013

Nifty gaped up above PDH and refused to go further up. It made a Barbed wire pattern around PDH/BRN. Skipped the BOF of IR low as there was no space left after PDH and BRN to the Range High. Went short on the BOF of IR High ( MC Low).Alternatively you can treat this as a Cigarette.Nice 50 Point move. Notice how the Fluid Worked.What about VWAP.?

Endowment Effect

"Endowment Effect" is a cognitive bias. It is also known as “Divestiture Aversion” in psychology. Simply, it refers to our tendency to value an item more once we own it. We are always less willing to part with something which we own. Think of how a book on your shelf that you have not used for years seems to increase in value the moment somebody asks for it.

Endowment effect is applicable to ideas and methods equally well. Once we commit a lot of time and effort to learn something, we start to own it and become emotionally attached to it. Even if we find this useless at a later stage, we are reluctant to disown it and discard it. Worse, we spend a lot of time and energy to find justification to hang on.

This cognitive bias is surprisingly strong among traders. During the initial stages of development; they get exposed to many things and spend a lot of time and energy to master these skills. They hold on to these old possessions for ever for no good reason. This will do a lot of harm than good.

Ensure that you are spending your time and energy on something “Actionable” .Your analysis should be  focused on something easily “Recognizable”, “Reactionable” and “Repeatable” otherwise you are analyzing to paralyze yourself. Frequently do an audit.  Eliminate the non essentials and get rid of the time wasters.

Reduce, focus and simplify.

22032013

Nifty opened within previous day range and moved within a 20 point range. Finally BOF of PDL/Range Low gave a long signal. TP at BRN. Did not attempt BOF of BRN as I expected the range high to give support.