In Mr. Arthur Koestler’s book, The Act of Creation, he discusses the logic of laughter. I have recently written about Mr. John Cleese and his thoughts regarding humor and what is needed in order to be creative. Both men share similar ideas which can be applied to trading models and trading systems.
Mr. Koestler states that humor occurs when there is, “the perceiving of an idea…in two self-consistent but habitually incompatible frames of reference.” The “idea” here is similar to the main idea of our trading model and the frames of reference underlying the trading system. Successful and robust trading systems usually operate within various frames of reference, for example, two or more time frames, markets, or events.
When we “get” a joke, we are usually relating the idea of the joke to two or more frames of reference. When we trade, we use various frames of reference for the trade to setup. But when we trade we always seem to use time as one of those frames of reference. It may be the time frame we choose to trade in, or the use of two or more time frames to setup the trade. I wonder if there is any way we can avoid the concept of time when we trade? And if time is usually one frame of reference, what is the other, non-time frame of reference we use? Maybe this is what Mr. Koestler discusses as “incompatible” frames of reference. As a systematic trader I tend to think about things like this.
Mr. Koestler uses the term bisociation to refer to things that operate on two planes or frames of reference. He further states that simple, routine thinking operates on a single plane, whereas the creative act always operates on one or more planes. Successful trading systems are usually bisociative, like any art form.
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