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Catallactic Analysis

Not only has this site (Catallactic Analysis) been mostly dormant for over a year, but so too has been my trading activity. I have been extremely busy over the past few years with a wide variety of endeavors which have occupied most of my waking hours. In the process I have been lucky to work with some amazing people who are way smarter than me. It has been a challenge, and in order to keep up I’ve had to focus on the details, like trying to figure out how to structure and code some pretty complex algorithms, while not concerning myself too much with the big picture. This experience, while still ongoing, has left me with a long list of yet to be articulated questions piling up in my mind. In order to start the process of working through these questions and searching for answers I decided to spend some time updating this site to share some of my thoughts and ideas as a prepare to relaunch my trading activity.

Why even trade in the first place?       

What lures me to the market is that it is one of the last frontiers on which merit rules and using economic means only (as opposed to political means) is sufficient to increase one’s wealth or even start from basically nothing and follow the path of  “rags to riches” if you are willing to work hard enough. No doubt there is a lot of shenanigans in the financial markets today with increasingly more obstacles being added via political action.

This however does not prevent one from being a successful trader, it only adds to the difficulty. As long as the barriers to entry remain low and the markets remain at least somewhat free, there will be opportunity for profits. In fact I believe the most opportunity may lie with the independent trader in this era of increasing vertical integration within the financial industry.

Trader as Entrepreneur

One of my passions is the study of Austrian Economics (if you haven’t guessed from the title of this site) and one of the great achievements of the Austrian school is the development of the theory of entrepreneurship (1).  It was Richard Cantillon (although not formally considered a member of the Austrian school) that introduced the concept of the entrepreneur as an uncertainty-bearer.

Cantillon’s  definition of an entrepreneur as, “someone who engages in exchanges for profit; specifically, he or she is someone who exercises business judgment in the face of uncertainty … buying at a certain price and selling at an uncertain price” strikes at the essence of what it means to be an entrepreneur and makes clear the core issue facing the entrepreneur, that of uncertainty. From this definition we can establish the trader as entrepreneur, for it is the trader’s continuous task to make judgments (expressed through market participation, i.e. trading) about the uncertain future conditions of the market. Arising from this understanding and of practical importance is the question of: what are the applicable methods and tools a trader can use to make these judgments?

Methods and Tools

I plan to continue exploring the practical application of trading methods through the testing and creating of trading systems and strategies along with analysis and observations of current conditions. Most of my focus will be on technical or quantitative (in the general sense of the term) methods that can be studied and applied systematically.

I plan on researching and testing conventional methods as well as introducing some of my own. Additionally I hope to investigate some of the theoretical principles of the market to see if a greater understanding is useful and can serve as a guide in making better decisions as a trader. I hope to layout and develop a “science of trading” that if for no other use puts me on the path to reestablishing myself as a successful trader.

  1. If you are interested in learning more about the history and implications of the Austrian formulation of the entrepreneur, I recommend Nicolai J. Foss and Peter G. Klein’s new book Organizing Entrepreneurial Judgement


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