I received an email from a reader some time ago who was upset that there was not more information on our site. He read the fundamental notes that are posted for the cotton market several times and was frustrated that "nothing changes." He wanted Dailyfutures.com to provide more explanations as to why the price went up one day and down another. I understand his frustration and mention it here because many of us have probably felt the same way at times. We want to make money and we are tempted to think that we would do better, if we had more information, fair?

The simple truth is that each day's price moves don't come with explanations attached. The few "explanations" that we do get in the media are typically man-made attachments - not always true reasons (this site included). Some days, of course, there are significant news events that can change the course of a market and I try to highlight those in our "Market-Moving News" section, but major events don't occur everyday. What are we supposed to do in the meantime?

The answer is simple: Stop thinking and start observing.

Why do I say that? Meet Tor Norretranders, one of Denmark's top science writers. His 1991 book, "The User Illusion," contained a profound insight that I still find hard to grasp. In it, he said that scientists have tried to measure the amount of information that each of us takes in through his senses and it comes to about 11 million bits per second. 10 million bits per second comes from our eyes and the rest from our other senses. How much of that gets processed by our conscious mind? About 40 bits per second or less. Stop and consider the ramifications of that. Our conscious (thinking) minds are only processing a tiny representation of "reality" at best. Trying to perceive the world by taking in information and then thinking about it is like trying to drink the Pacific Ocean through a cocktail straw - an impossible task. There is far more reality out there than we are capable of mentally absorbing and the information is changing rapidly.

What are the implications for us, as traders? First of all, we might as well get used to the feeling of perpetual uncertainty - it is part of the game. We will never know anything for sure. Second, it becomes absolutely vital that we be attentive to events as they unfold. We must let go of everything that we "think" we know and allow ourselves to be surprised. Our biases are the enemy - they obscure our vision and dull our senses. Market expectations are eventually wrong about something - the sooner we discover what it is, the better. What are we watching for? Fresh glimpses of reality. Unexpected changes of direction... in the flow of the news, yes, and also in the flow of prices. Surprises that break outside the old constraints of public expectation reveal new opportunities to be seized... often before our minds can fully catch on.

As I see it, the universe is vast and our brains are dim. The most important skill for good trading, therefore, is observing; not thinking. The market moves in unpredictable ways that never cease to surprise. In the same way that you cannot be a good listener when you are talking, you cannot be a good observer when your attention is consumed by too much analysis. Dailyfutures.com is designed to help you observe the markets and notice the surprises that lead to meaningful profits. I invite you to become a daily news subscriber and invest a few minutes each day in becoming more aware of the role that commodity markets play in our changing world. And pay special attention to the "Market-Moving News Section" - nothing is perfect, but it contained some real jewels this year.

Best wishes,

Todd Hultman,
Dailyfutures, Inc.
December 17, 2009.

P.S. I am not the first one to notice how excessive thinking hinders our ability to observe clearly. Below are some of my favorite quotes on the subject.