Innovative Trading Through TRIZ, Principles 11 – 15
Posted on November 22nd, 2006
Written by Richard
Posted in: N/A (old archives)
Here, I’m going to cover the next 5 TRIZ Principles, as they relate to trading. There are 40 in all. You might want to glance at the Kick-off Article in this series, if you haven’t seen it, for further explanation. Basically, these are principles derived from an international study of patents. The idea is to isolate the foundations of innovative ideas, which can be applied to any creative endeavor.
These principles, and the examples from trading below, are meant to get the mental juices flowing. The idea is to apply these principles to new problems. When you think about how to improve your trade execution, or your trading system, or the way you track your performance, or whatever else, you can read through the principles and see what kind of ideas emerge.
Perhaps some of you will read these and immediately think of other trading-related examples of these notions. If so, don’t be shy! Post it in a comment. The more the better, and there are no wrong answers. If the description makes you think of it, then it is TRIZ at work, and it is always correct. Let’s get started!
Principle 11: Cushion in Advance
This is similar to principle 9 (prior counteraction). Here’s the difference: counteraction wards off failures, and helps keep something from failing. The advance cushion referred to here merely helps soften the blow when an unreliable part does fail. Examples in trading include:
- having a second internet access method, for when your service goes out.
- putting reliable secondary streams of income in place, to cushion down cycles in trading profits
Principle 12: Equipotentiality
This principle is essentially about getting rid of unnecessary movement and rearranging (either physical or mental). Think about the difference between a chest of drawers and a trunk. If you want something at the bottom of a trunk, you have to move around everything on top. In a chest of drawers, you just open the bottom drawer. Examples of equipotentiality in trading include:
- Moving to multiple desktops and/or screens, so you don’t have to work hard to see everything you need to at once. Using tabs inside windows can really help, here, too.
- Reading all your favorite trading blogs at once via RSS, rather than going to each site individually all the time.
Principle 13: Do it in Reverse
Perform the steps of a process in reverse, to realize some benefit. Examples in the trading arena include:
- the premier example is short selling, of course. Selling before you buy, to take advantage of downturns in stocks.
- Some days it’s easier to look for setups and then check the volume. Other days, it’s easier to check for volume, and then try to find a setup.
Principle 14: Spheroidality
This refers to replacing flat surfaces with curved ones, and hard edges with rounded ones. In trading, an example of this would be:
- Moving averages, and some technical patterns like cups and handles, smooth and round-out OHLC data.
Principle 15: Dynamicity
This principle involves allowing the design or characteristics of an object or process to change over time, rather than remain static. For some problems, change in real-time is the only way to optimize the solution. Examples in trading include:
- I prepare watchlists/rough trading plans every night, and then dynamically adjust them once trading starts.
- Taking new market conditions into account during trade management, vs just waiting for your stop loss to get hit.
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© 2010 Richard Todd. I am not a financial advisor, and nothing on the site should be considered investment advice or actionable recommendations. I'm just an individual, saying what I think, and sharing my experiences.