by Ken Long

If you want to find opportunities in the market that no one else can see, then you must admit to looking at the market in a different way than the herd. In practical terms this can mean doing things like:

1. Adjusting the parameters of a popular instrument of technical analysis so that you get a different insight than the mass of people who use the default parameters.

2. Applying existing indicators of technical analysis in a new way.

3. Combining indicators in a unique way.

4. Inventing a new piece of technical analysis of your own.

5. Developing a new concept for how the market works that includes an interpretive scheme that leads to actionable intelligence.

6. Varying the time frames of existing systems.

7. Data mining to find previously undiscovered relationships.

8. Looking for opportunities by taking the opposite actions suggested by conventional wisdom.

9. Creating a new metaphor for trading that offers new insights into trading practice.

10. Discovering old systems from the past that have fallen out of favor but which may come back into season in the current situation.

None of these techniques is a surefire recipe for success, but then again nothing in trading is for certain except that you will pay a commission and take a risk for the possibility of a future return.

Another certainty is that all of your best ideas will someday no longer be effective because the market will adapt to undermine your success. This may sound like a paranoid and pessimistic perspective, but it turns out to be a useful way to remind yourself that you must always be looking for new edges in such a dynamic market.

The minute you stop searching for new ideas and new ways of expressing your edge, is the minute that the pack is gaining on you. Remember that when the pack catches you, it is not a pretty sight.

There is no antelope so swift that it cannot be caught and no hunter is so powerful that he cannot be hunted himself.

The law of the market is the law of the jungle. Traders would do well to reread Kipling’s “The Jungle Book”, and reflect upon the Law of Tooth and Claw, the power of the pack and the courage it takes to face your fear.