Maybe it’s the map?

I wrote a post late last week on the value of admitting what we don’t know. I made some arguments about the dangers of false confidence, and the errors we can make if we don’t take the time to think deeply about the limits of our knowledge. Though I think I made some good points, one of my readers have some good counterpoints, and points out a few things I may have missed. In Shai’s own words:

I’m following up on your last great post “the hardest words to say”. In other words, what you are basically describing is that people normally prefer to have the “wrong map” rather than “no map” at all. 

While I personally prefer the “no map” way of living and frankly was quite judgmental in the past about people that preferred the “wrong map”, I’ve learned over the years that there is value in having a “wrong map”.

The major issue is that having the “wrong map” creates a belief you are heading toward your goals.  This belief, more often than not, helps overcome very difficult and dark moments one might have in their journey. Without it, a common outcome would probably be quitting with despair.  Consider a situation when you or one you know had a “wrong map” while in the “dark”.  Did that “wrong map” generate a belief that eventually  pulled you out of that darkness?. 

I think that adopting a “no map” style of living comes only after being in that long journey for a while, falling and getting up.  Therefore for a new trader using the “no map” concept too early might make more harm than having him use a balanced approach that has “wrong maps”.

Thought this was not so clear  in your post.

These are a good points, and a perspective I missed. I do think there is value in my original points, perhaps most important, that it is necessary to do “something” in the market that has a statistical edge because, without that edge, we can’t profit in the long run. (If there’s one, central message to all the words I write, I think that’s it!) I could take Shai’s map analogy further and say “yes, so you just want any map, but what if that map leads you off a cliff…?”, but then I consider the alternative: Is having no map, no plan, and simply shivering the darkness a good alternative? That is a nearly certain path to failure.

There is a line from an old US Army infantry manual that says: “Any plan, no matter how poorly conceived, if boldly executed is better than inaction“, and I do see the point. Given unfamiliar territory in a hostile environment, perhaps the best plan is to simply move. Do something; pick a direction, and go. Evaluate and course correct as needed, but get moving.

There’s also probably great value here, as the individual, self-directed trader refines her own map. Years ago, when I started trading, I thought I was going to look for something like double bottoms in cattle futures, pyramid up as the trend reversed, and eventually control thousands of cattle contracts, starting with a few thousand dollars in risk capital. I had a wrong map; I had a bad map. In fact, I don’t think you could have had a worse map! I had a map that absolutely assured financial ruin, but I learned why that map was wrong, made better maps, and eventually came to understand a few things. My trading journey started with a bad map.

As I thought about Shai’s words over the weekend, the irony struck me: in writing a post about the dangers of intellectual hubris and of not considering the limitations of our knowledge, I may have been guilty of that same hubris. Maybe there is value in the map, no matter how flawed, and maybe there is wisdom in the process. It pays to check and recheck our assumptions, and I am fortunate to have readers who think deeply and challenge my perspectives.



Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.

This Post Has 5 Comments

  1. Daniel Martin

    Hmm. I agreed with the prior post. I am not sure I agree with the update. Sure, if in enemy territory, being hunted & under fire you simply have to move, no matter what, even with an imperfect or “bad” plan. Inaction is simply not an option here. The trading analogy may be being trapped in a trade, the market gapping against you on unexpected news or shock. You may have to move (get out incrementally at bad prices) to minimize impact. But I tend to opine that trading is not normally like this. Usually damage is done by entering ill-conceived trades. We can, in trading, opt to sit still and wait until a bet with a potential edge is detected. Only then will we move. If I don’t see this, I am happy to watch my screen the whole day and let the action unfold without taking a single trade for 1 days, 2 days, whatever. This is a luxury not available to the trooper under fire. Maybe not even to professional long only equity managers who are expected to put customer funds to work. But I, as an independent trader, do have this luxury to not move for as long as I do not have a map/plan/positive edge situation.
    Well, even if I disagree somewhat, this is a fruitful discussion. We, as traders, may need to distinguish between the two scenarios. In one, I am the prey and have to run. Under the other, I am the predator and will only spend valuable “hunting energy” on the absolutely best bets.
    Looking forward to listening your new trading course instalments by the way! Best, Daniel

  2. alan

    Interesting Adam, and I tend to agree. The process is what teaches the craft. Not the theory. Even if the theory is a pre-requisite : no edge, no money on the long run. And as it is absolutely impossible to get one’s trading process right at the first, or second, or even often nth attempt (n being large but hopefully not infinite), one has to follow wrong maps at the begining. Also, the markets being like changelings, on has to have a few good maps to survive.

    The critical part in my opinion is having a plan for coping with wrong maps.

  3. Bart

    I would argue that unless the self-directed trader has a growth mindset the wrong map is probably not much better than no map. As without a growth mindset the trader will not even be aware their map is wrong, let alone make the adjustments needed to make a better map.

  4. Adam Grimes

    All of these are good points. Shai also clarified to me, in an email, that he agreed with the original post but just wanted to offer something I might have missed–good points and ideas to think about here, and from the comments as well! thank you all for contributing to the conversation.

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