Data-Directed Decision Making

There’s a fine demarcation line in the investment world between analyzing financial, news, and statistical business data to anticipate market direction (See: Fundamental Analysis) vs. analyzing human nature and psychology for market trend pattern prediction (See: Technical Analysis). The two can successfully go together hand-in-hand on serendipitous occasions.

The Academy Award-winning 2015 film, The Big Short, best depicted this phenomenon. Highlighting the subprime mortgage bond crisis, which led to the banking shocks and closings in 2008, the film revolves around the data driven decision making of hedge fund manager Michael Burry, whose analysis of the housing market’s imminent subprime home loan defaults flew in the face of conventional wisdom on Wall Street. By putting his money where his mouth was (over $1 billion into credit default swaps betting the market would collapse), he attracted the attention of other managers, who fed off the notion of contrarian market psychology after reviewing Burry’s moves. The rest is literally history: Goldman Sachs almost went bankruptish.

Data-directed decision making attempts to take emotion out of trading and is the primary platform for computer trading, which automatically generates buy and sell orders when target calculations derived from mathematical algorithms are recognized. If you know how to perform these arcane functions professionally, there's a million-dollar-a-year job waiting for you just about anywhere you want to park your keester on Wall Street.