Sunday, August 16, 2009

Long Term Memory

For discretionary traders, such as myself, it is important to remember market reactions to previous support and resistance prices, and technical patterns. One of the ways to improve memory of market patterns is to repeatedly expose yourself to the patterns that prove to be profitable. This is one of the reasons that I started this blog, that is to repeatedly remind myself of profitable market patterns.

One of the sources to understand how human memory works is the WNYC RADIOLAB on Memory and Forgetting. Repetition is important for memory because new experiences have a tendency to intertwine themselves with old memories, and incorporate both into one memorable experience. This means that memories degrade with time. In the book "Brain Rules" in Chapter 6 titled, "Long-Term Memory", John Medina writes:

"This idea that the brain might cheerily insert false information to make a coherent story underscores its admirable desire to create organization out of a bewildering and confusing world. The brain constantly receives new inputs and needs to store some of them in the same head already occupied by previous experiences. It makes sense of its world by trying to connect new information to previously encountered information, which means that new information routinely resculpts previously existing representations and sends the re-created whole back for new storage. What does this mean? Merely that present knowledge can bleed into past memories and become intertwined with them as if they were encountered together. Does that give you only an approximate view of reality? You bet it does. This tendency, by the way, can drive the criminal-justice system crazy."

You may want to consider this tendency of human memory the next time that you are on a jury.


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