The Traders Journal

How Individual Investors Can Use Data Mining to Grow Their Profits


ImagesSchwab, Fidelity, TD Ameritrade and Google likely know more about most investors and their trading habits than the investors themselves.  Have you ever asked yourself why Google offers free gmail accounts?  It’s because they are obsessed with collecting data.  They now have complex algorithms and unimaginable computing power that allows them to sift through vast seas of raw data and literally get inside your head.  This consumer data has real economic value that now lets them know what truly and deeply motivates you as a unique individual consumer, voter or whatever – it’s absolutely infinite.

Why talk to people and use old school market research asking investors what they thought or what they need.  They seldom tell you honestly anyway.  The dark side is that these big corporations have morphed their marketing research departments into the ultimate supercomputing spy shops with gear that vacuums, collects and mines every piece of data imaginable concerning you.

With all this information about you sloshing around, appreciate that billion-dollar corporations have learned to data mine your life and understand you in ways you could never hope to understand yourself and this has real marketing value.  They use this knowledge internally or they can resell and barter for services by offering you to third party vendors as well.

An example was the recent Consumer Electronics Show in Las Vegas where Ford’s marketing boss, Jim Farley, offhandedly remarked during a panel discussion that “We know everyone who breaks the law.  We know exactly when you do it because we have a GPS sensor in your car – we know where you are and we know how fast you’re driving.”      

This is pure conjecture on my part, but I bet Jim Farley’s equivalent at Schwab, Fidelity and TD Ameritrade could have blurted out a similarly appropriate comment about each of their investors, too. 

The first of my 3 key points regarding my rather lengthy soliloquy is that there exist immense profits for corporations who understand your behavior, and therefore, I lobby you as an investor, even more significant profits will accrue to you as a trader if you make the same effort to understand yourself.  No algorithms or super computers required.

My second point is that protecting your data and shielding your personal information from both the good guys and the bad guys should easily justify in your own mind to make an ongoing appropriate effort to do whatever is timely and necessary.  The fact is that it’s clearly very important and requires constant focus on your part.  I’m not even going to get into the NSA surveillance programs.

My third point is that my data mining tool of choice is the Traders Journal.  Write in it regularly, learn to use it correctly and don’t procrastinate reviewing it sincerely.  Fact is that the past quickly becomes cluttered with distorted memories.  Review your past trades before they appear so tiny in your rearview mirror that present memories fade and your accurate recollections with respect to that trade become a mere speck and then completely disappear from view. 

We investors must always trade in the present, but the reality is that it always happens in the shadow of our past.  It is these shadows that we individual investors must “mine” so as to bring more light to our present trades.  The bottom line is that it’s our behavior as investors that largely determines our success or failure – not our brains or technical tools.

Trade well; trade with discipline!
-- Gatis Roze

Personal Note: I want to thank my readers for all the kind comments and encouragement. Your responses most definitely motivate me. For those of you who are not yet using the automatic delivery feature, please check it out. It makes it easy to receive fresh content every Friday by various delivery methods of your choice. Check out the options under the heading “Subscribe to this blog” on the right.

Gatis Roze
About the author: , MBA, CMT, is a veteran full-time stock market investor who has traded his own account since 1989 unburdened by the distraction of clients. He holds an MBA from the Stanford Graduate School of Business, is a past president of the Technical Securities Analysts Association (TSAA), and is a Chartered Market Technician (CMT). After several successful entrepreneurial business ventures, Gatis retired in his early 40s to focus on investing in the financial markets. With consistent success as a stock market trader, he began teaching investments at the post-college level in 2000 and continues to do so today. Learn More
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