free download links about online stock trading, forex, futures, stock investing, market, trading systems
THE WRONG MAP
Back to contents page

Most traders lose because they are lost, and they are using the wrong maps. I live in Mobile , Alabama , where Mardi Gras celebration is years older than the more famous New Orleans Mardi Gras. We recently had a friend inquire about visiting us and then going on to the New Orleans Mardi Gras. When he inquired if we had a map of New Orleans, I jokingly said no but that's OK because I do have a map of Mobile. He thought I had lost my marbles until I pointed out the similarities in geography between New Orleans and Mobile . New Orleans has a river running through downtown; so does Mobile. New Orleans has a large lake on the outskirts; so does Mobile. New Orleans is close to the Gulf of Mexico; so is Mobile. Geographically, they are very much alike. I am much more familiar with the Mobile map than the New Orleans map, and I've been using the Mobile map for years.

Had my friend taken my advice and attempted to find Bourbon Street using a Mobile map, he never would have arrived at Bourbon Street. He most likely would have gone the wrong way on one-way streets and found himself at the end of dead-end roads. Similarly, most traders go wrong because they attempt to navigate the market by referring to wrong maps.

The right kind of map for the market is not a map of territory but a cultural logic map. Your cultural logic affects everything you do—your speech, your thinking, your behavior, how you eat, how you enjoy sex, and how you trade. Your perceptions of all your activities depend on the cultural logic map you are using.

Historically, our current cultural logic map started around 500 B.C., in a gigantic cultural revolution starring Plato, Socrates, Aristotle, Heraclitus, Demosthenes, Euclid, and others. A philosophical war was going on, especially between students of Aristotle and Heraclitus. Aristotle seduced the intellectual world with the idea that if you don't know something, your best bet is to go to someone who knows more than you and ask him or her some questions. That makes sense but, as we will see later, it may not be the best map for trading. Her- aclitus's most famous saying translates to: "You can't step into the same river twice. No matter how fast you put your foot into the water, withdraw it and put it in again, not only has the river moved but your foot has also changed."

Because our ancestors selected the Aristotelian approach, we have the precedent system in our law courts, the "scientific method" that acknowledges only experiments that are "repeatable," and the "double-blind" studies in medicine. Aristotelian logic affects our perception of and interaction with the world at every step.

Euclid, around 500 b.c, developed what is now called plane geometry. He never meant it to be a "description of nature." He designed Euclidean geometry to be a report card for art. During his lifetime, art was flourishing and the value of a piece of art depended mainly on personal bias. Euclid came up with laws of proportion and balance, for more consistent standards to evaluate the art of that day. The laws were never designed to be used in surveying or navigation.

One of the "laws" of triangles is that "the interior angles of any triangle will always total 180 degrees, no matter what the shape of the triangle." That is true, but only in the gravitational field of the earth. As a spaceship leaves the earth's gravitational field on its way to the moon, the total becomes more than 180 degrees because of the curvature of space. For us, that variation doesn't matter; most of us will not go to the moon. The point, however, is that the law of triangles is a specific truth and not a universal truth. That concept will become extremely important as we do an in-depth study of our market maps.

In the history of humans, there seems to be a cataclysmic change about every 500 years. About five centuries after the renaissance in Greece came the birth of Christianity, and about five centuries later the Roman Empire fell to barbarian invaders.

During the centuries that followed (the so-called Dark Ages), the Catholic Church preserved most of our Western culture's knowledge. The Vatican Library has been the main repository of the manuscripts that were the sources of learning. At that time, the Church believed that only priests should be taught to read because only they had the training to properly interpret the scriptures. Churchmen felt they had received all the Truth straight from God, and were not motivated to explore more of the unknown in search of further and newer truths. Their perceived mission of keeping heathens, heretics, and infidels from polluting "the Truth" produced the Crusades, the Inquisition, and notorious witch hunts. What is more important here, their rigid definition of acceptable knowledge affected the way that people, even today, believe the world to be.

Copernicus and Galileo were hampered in their scientific explorations by a consensus of what was proper to investigate. Around 1500 a.d v the big news was gun powder and movable type. Knowledge began to spread all over the world at a previously impossible speed. Political and Church power began to dwindle as common individuals' knowledge began to increase.

Isaac Newton made the connection between a falling apple and gravity. Even as he drew a slightly more sophisticated picture of natural phenomena, he was still entombed by the culture of his day. Classical physics developed within the confines of the same logic map. The "scientific method" handed down from Aristotle became the accepted method for the search for and the definition of relevant knowledge.

Traditional science, which created automobiles, factories, air and space travel, computers, and many other advances, turns out to be impotent in two vital areas: (1) living systems and (2) turbulence. Classical physics can describe every nanosecond since the "big bang," but it cannot approach any explanation of blood running through the left ventricle of the heart, the turbulence in a white-water river, or the tasseling of corn. If the market is anything, it is living systems (human traders) working in turbulence (the market).

Physics in the 20th century will be remembered for three revolutionary developments: (1) relativity, (2) quantum mechanics, and (3) the science of chaos. Einstein left us with only one constant—the speed of light. Quantum mechanics took that away. Now, the science of chaos is changing our entire worldview.

Look at it this way. The room where you are as you read this page likely has straight lines and flat walls, which you al­most never find in nature (with a few exceptions in crystalline deposits).

We have developed a whole set of mathematics under the crippled logic of our evolving, developing brain. This logic leaves immense areas of our world undiscoverable and indescribable. Recently, a new look at the world, a science of chaos, has been emerging. Chaos is a particularly unfortunate name because chaos actually refers to a higher degree of order.

We will look more closely at the science of chaos in the next chapter and will then examine the underlying structure of the market and how it yields much better indicators than traditional technical or fundamental analysis does.

SUMMARY

The market is simple. Quickly and efficiently, it finds that point where there is equal disagreement on value, and agreement on price. We illustrated that concept with the "Flintstone market" and the trade between Barney and Fred.

 Back to contents page