Patterns

Humans evolved to recognize patterns because our survival depended on it. Understanding how a predator moved could keep you alive. Recognizing where food was likely to be could help you find your next meal.

Thousands of years later that instinct hasn’t disappeared. It’s why we notice when the time is 11:11, or see our lucky number more than others, or become convinced that coincidences “can’t just be coincidence”. Our brains are wired to find order in chaos.

The problem is we’re not actually very good at distinguishing real patterns from imagined ones.

I have about 300 songs on my ‘Favorites’ playlist. There are dozens of different artists (plus some questionable additions from my kids like K-Pop Demon Hunters and Cocomelon).

If I’m listening on shuffle and I hear two songs by the same singer back to back, it immediately seems wrong. I think, “Shuffle isn’t shuffling” - except it actually is.

In fact, Spotify found that people were complaining their playlists weren’t random…because they were too random.

True randomness naturally creates clumps, streaks and coincidences. But humans expect randomness to feel spread out, so Spotify adjusted its algorithm to be less random, in order to feel more random!

The same thing happens in trading. We see repeating chart patterns, recurring price moves, or familiar behaviors in contract negotiations and instinctively think history is repeating itself.

Sometimes that’s experience recognizing a genuine edge. Sometimes it’s simply our brains doing what evolution taught them to do.

So the next time you think you see a pattern emerging, pause for a second. It may well be the start of something important. But it may also just be a brain that’s trying to avoid becoming someone else’s lunch.