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WHAT DID YOU LEARN FROM THE RAT IN 2010?

Posted: Mon Jan 03, 2011 1:28 pm
by TheRumpledOne
WHAT DID YOU LEARN FROM THE RAT IN 2010?

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"Look, for example, at this elegant little experiment. A rat was put in a T-shaped maze with a few morsels of food placed on either the far right or left side of the enclosure. The placement of the food is randomly determined, but the dice is rigged: over the long run, the food was placed on the left side sixty per cent of the time. How did the rat respond? It quickly realized that the left side was more rewarding. As a result, it always went to the left, which resulted in a sixty percent success rate. The rat didn't strive for perfection. It didn't search for a Unified Theory of the T-shaped maze, or try to decipher the disorder. Instead, it accepted the inherent uncertainty of the reward and learned to settle for the best possible alternative.

The experiment was then repeated with Yale undergraduates. Unlike the rat, their swollen brains stubbornly searched for the elusive pattern that determined the placement of the reward. They made predictions and then tried to learn from their prediction errors. The problem was that there was nothing to predict: the randomness was real. Because the students refused to settle for a 60 percent success rate, they ended up with a 52 percent success rate. Although most of the students were convinced they were making progress towards identifying the underlying algorithm, they were actually being outsmarted by a rat."

Pg 64 - HOW WE DECIDE

Posted: Mon Jan 03, 2011 3:29 pm
by wangyue22
market is simple? o.O

Posted: Mon Jan 03, 2011 3:53 pm
by ajaymein
Trade away from extremes.

Posted: Mon Jan 03, 2011 4:48 pm
by Relativity
Rats are hardy creatures and adapt well to most environments. All because of a simple plan: keep going one direction until food appears. Its funny that I think more humans die of salvation than rats do. LOL!

Posted: Mon Jan 03, 2011 5:31 pm
by GeorgeCh
That the best way to trade is to assume that markets are random and emerging trends are impossible to reliably predict without looking at the fundamentals, which would put us squarely into the long-term investing - rather than trading - game.

Once you accept that markets are random, you start focusing on predicting not medium-term trends spanning days, weeks, or hours, but, rather, immediate, knee-jerk reactions in a market driven by human psychology - for instance, corrective retracements from the daily high/low.

Smile, people, it's all random!

Posted: Mon Jan 03, 2011 8:00 pm
by cwn6161
Relativity wrote:Rats are hardy creatures and adapt well to most environments. All because of a simple plan: keep going one direction until food appears. Its funny that I think more humans die of salvation than rats do. LOL!


I'd argue that more humans are saved by salvation than rats! :lol: :wink:

Posted: Mon Jan 03, 2011 8:19 pm
by TheRumpledOne
GeorgeCh wrote:That the best way to trade is to assume that markets are random and emerging trends are impossible to reliably predict without looking at the fundamentals, which would put us squarely into the long-term investing - rather than trading - game.

Once you accept that markets are random, you start focusing on predicting not medium-term trends spanning days, weeks, or hours, but, rather, immediate, knee-jerk reactions in a market driven by human psychology - for instance, corrective retracements from the daily high/low.

Smile, people, it's all random!


No way you learned that from a rat. It reads like something a YALE STUDENT would say.

Posted: Tue Jan 04, 2011 12:37 am
by wangyue22
up or down, market chooses

oh and the long evans rat is so cute. work with them at work. ^.^ when they stand up, it looks like its wearing trousers

Posted: Tue Jan 04, 2011 12:38 am
by wangyue22
oh jeez people, this is so obvious: dont be a yale student

edit: just read this, or dont be the following long evans rat:

Over-expression of a particular gene (NR2B) that lets brain cells communicate just a fraction of a second longer makes a smarter rat, according to a recent research report. The researches showed that a transgenic Long Evans rat that overexpressed NR2B was able to remember novel objects, such as a toy she played with, three times longer than the average Long Evans female rat, which is considered the smartest rat strain. The transgenic rat was also much better at more complex tasks, such as remembering which path she last traveled to find a chocolate treat. NR2B is a subunit of NMBA receptors, which are like small pores in brain cells that let in electrically-charged ions that increase the activity and communication of neurons. Dr. Joe Tsien, an author of the report, referred to NR2B as the "juvenile" form of the receptor because its levels decline after puberty and the adult counterpart, NR2A, becomes more prevalent. While the juvenile form keeps communication between brain cells open maybe just a hundred milliseconds longer, that's enough to significantly enhance learning and memory and why young people tend to do both better, Dr. Tsien said. The report was published October 19 in PLoS ONE. [Press release] [PLoS ONE article]

Posted: Tue Jan 04, 2011 2:12 am
by PebbleTrader
Accept the inherent uncertainty of the reward and learn to settle for the best possible alternative.