reality is encoded through senses the limits of perception

Your brain does not show you reality. It shows you a useful approximation of reality, optimized for survival — not accuracy. Colors are assigned by your visual cortex, not intrinsic properties of light. Sound is pressure waves translated into experience by your cochlea. Taste is chemical receptors evolved to detect nutrients and poisons, not objective food qualities.

Everything you perceive is an encoding. And every model you build is based on that encoded data — already filtered, smoothed, and interpreted before you even become conscious of it.

see also: the map is not the territory models vs markets · impermanence-in-trading · gn12-extremistan-vs-mediocristan

what this means for trading

Your charts are encodings of price data. Your indicators are encodings of encodings. Your thesis is built on encodings of encodings of encodings.

By the time you form an opinion about where a market is going, you are multiple layers removed from the actual economic activity the market represents. Every layer introduces compression, distortion, and latency.

This is not an argument against using charts. It’s an argument for epistemic humility. Your certainty about a trade should be inversely proportional to the number of encoding layers between you and the underlying reality.

the opposite of what you think

The natural response to “my perception is limited” is to gather more data, more indicators, more information. But more data is more noise unless you have a framework to filter it.

The right response is better frameworks, not more data. A trader with one indicator and a clear edge will outperform a trader with 20 indicators and no architecture. The second trader is drowning in encoded reality without a map.

tacit knowledge

Michael Polanyi’s insight — we know more than we can tell — applies directly. The experienced trader who can “feel” when a market is about to turn is accessing pattern recognition encoded in their nervous system through thousands of hours of exposure. They cannot fully articulate this knowledge because it was never encoded in language. It was encoded in experience.

This is why trading skill cannot be taught through books alone. The knowledge that matters is in the doing.

my take

I’ve stopped trying to optimize my information intake. I focus on reducing encoding layers instead. I look at price and volume — the closest encodings to actual market activity. I limit indicators to 2-3. I spend more time thinking about what the market is doing than what my indicators are saying.

The most dangerous state is feeling certain. Certainty is a sign that you’ve confused your encoded model for reality. The market will always show you something your model didn’t encode.

The only honest response to this is to trade small, plan well, and stay humble. Your map is useful. But it is not the territory.

linkage

• [[the map is not the territory models vs markets]]
• [[impermanence-in-trading]]
• [[gn12-extremistan-vs-mediocristan]]
• [[skin-in-the-game-trading]]

ending questions

what is one layer of encoding you could remove between you and the market right now? what would change if you did?