Data vs. Information

Collecting data is big business. In fact, there’s a name for it, Big Data. Some sources of data are the news media, public records, social media, blogs, customer profiles, company reports, and equipment logs. How important is all this data swirling around in the world today to your successful trading?

Due to the volume of the data collected, many companies have found their current data management tools are inadequate to the task. Why?

Three reasons:

The quantity of data collected from several expansive and newer sources such as Facebook, Twitter, LinkedIn, blogs, photographs, is overwhelming. For example, it’s estimated that business data doubles somewhere between a year and a year and a quarter.

The speed at which the data is produced. One reference I read was that Wal-Mart processes one million transactions per hour.

The disparate types of data collected create challenges for ‘mining’ the data for relevant and useful information.

Question: If the quantity, velocity, and variety of data is posing a problem for the business community with all their sophisticated equipment, software, and resources, how does a trader effectively discover his or her ‘right’ information for making high-probability, informed, trading decisions?

Does the answer rest in reading books, taking courses, participating in chat rooms, subscribing to newsletters, or any one of a number of other resources available? Candidly, I don’t know the ‘right’ answer because as traders we’re all different in how we collect data and convert, process, and prioritize it into relevant and usable information.

But one thing I believe we can all agree on is that we want relevant and valuable information that helps us make better trading decisions. That information for most traders is derived from the market itself in the form of market generated information.

And, going back to the world of Big Data and two of the primary proponents of Big Data, Oracle and IBM, their philosophies embody the concept of infrastructures that collect the data, organize it, analyze it, mine it for relevant and useful information as the basis for making higher-probability decisions.

Isn’t it interesting that big business, with all its resources, basically does what most successful traders do. They use relevant and useful information to make informed decisions.

As traders, we have many, many tools to select from to help us make informed decisions—decisions about where to enter the market, where to place our stops, and when to exit a position. Some work, some don’t. But one that has proved itself as a decision support tool is the Market Profile because of what it does and does not do.

What it does is record and organize market generated data and then display it in a graphical format that, at its core, is relevant and useful information. But, like most information, it is only valuable when interpreted, understood, and used as a basis for making an informed decision.

Bottomline: The conversion process from data to information to decision to action is vital to us as traders because it is a key factor in the results we achieve in our trading.

Until next time . . .