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The Risk of Trading: Mastering the Most Important Element in Financial Speculation by Michael Toma

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DATA ASSESSMENT

Once we have collected the data, we next need to know what we should do with it. Data acts as the pathway toward finding and understanding the advantage or disadvantage of making trading decisions based on similar occurrences. It acts as the catalyst to help you make the correct statistical decisions. Poor execution of such information has vaporized many a trading account. What is the data telling you about this particular setup? What is the data telling you about you? Using information to tell a story is rather easy and only limited by the capabilities of the data management software used.

Using information to determine the human element is much harder to assess, largely due to the high level of psychological components involved in the human mind and how one reacts to any given set of circumstances. When assessing the human element in trade history, I want to consider a wider scope of data in my assessment. For example, if I were looking to hire a trader for my team, I probably would seek information about their entire career, educational achievements, and other pertinent experiences and skills. Since their most recent skills better correlate to the position at hand, I may put more weight on that experience. This does not mean I neglect their prior achievements at earlier jobs or their overall level of ethics from their entire work history. The same goes for assessing trade histories. I may only need six months of credible market data to have a general understanding ...

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