Feb

15

avalancheI've been hooked by a perfect day back country touring in the Wasatch Mountains. It was like a big win on the first trade. I'm hooked for life. Back-country Skiing: Skills for Ski Touring and Ski Mountaineering by Martin Volken, Scott Schell and Margaret Wheeler (Kindle) is an excellent introduction to the sport covering equipment, basic avalanche safety, planning, and basic skills. There are some very interesting sections on group dynamics and decision making on which your life sometime hinges. There are many paths to the truths, and this book holds some universal applications to life and trading. Decision making and quantifying risk and mitigating the risk are a large part of avalanche safety. Human factors tend to be the cause of 90% avalanche fatalities. The human element include things like:

1. The negative event feedback loop which inures one to constant danger;
2. Back to the barn syndrome;
3. The false perception that stress is external when in fact it is internal.
4. Unwillingness to listen to others;
5. Overconfidence;
6. Limited observations;
7. Tunnel vision and narrow thinking;
8. Heuristic traps: familiarity, group think, getting locked into the plan,
expert halo.

The study of avalanches offers some interesting analogies to market analysis. The genius of Chair's use of analogy to find market ideas can be applied here. Skiers using the science of avalanches makes use of a technique of digging pits and examining the layers of snow. Here you can see some examples of snow pits and back country skiing in one of my favorite places, Valdez, Alaska. Avalanches are caused by the condition of the snowpack layers and current forces acting on it. Statistical analysis is powerful tool, however the study of averages and distributions has limitations. Study of actual recent data and its effect on current and future prices and vice verse should be done in a scientific method to augment study of distributions. This might be considered quantifying TA ideas of support and resistance, breakdown areas and the like. The market is affected by the T&S, order book, prior executions, open interest. This data is available or can be derived through simple arithmetic and scientifically tested. Market avalanches are due in part to the condition of the recent market action. Its a whole new worthwhile area for study.

Chris Tucker writes:

I have found similar useful ideas from Ed Viesturs' book No Shortcuts to the Top. Viesturs incredible training regimen and focus on safety have made him one of the most prolific and successful mountaineers in the world. His mantra: "Getting to the summit is optional, getting to the bottom is not" has kept him alive and enabled him to come back time and time again, even at the cost of sometimes being considered "shy" when others go forward. Others opinions bounce off him, if something doesn't feel right to him he will not press. I recall a description of a climb where two climbers precede ahead of him to traverse a very large and steep snow/ice pack. Viesturs took a few steps and felt that the pack was "loaded" (under heavy stress due to its weight and condition) and might come loose at any moment. He opted to pass on his summit attempt and waited for the others to do so. The fact that they succeeded in traversing the pack safely did not phase him in the least. He was content with his decision to remain safe. And yet he has summited Everest seven times and was the 12th person in the world to summit all fourteen peaks over 8000 meters.


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