Tuesday, January 27, 2009

John Boyd & Fighter Pilot Trading Introduction

Colonel John Boyd (1927-97) was an Air Force fighter pilot who changed the way fighters are designed and evaluated and changed military strategy. As a fighter pilot he focused on air combat tactics. He developed the 'Energy-Maneuverability' theory that helps to evaluate one aircraft against another and the benefits of one air combat maneuver against another. When the Pentagon was trying to build heavier and more powerful fighter aircraft he showed the need for a small, lightweight, highly maneuverable aircraft and the F-16 was born. His theories also helped to change land combat as well. In the 1970's he worked with the Marine Corp, already a 'first to strike' mental model to an even faster and more mobile fighting force.

Boyd developed the OODA (Observe, Orient, Decide, Act) Loop where 'time is the dominant parameter'. The fighter with the fastest OODA loop execution will, all things being equal, win.

For a trader the OODA loop can be an important tool. If you can execute your OODA loop faster than the market sentiment you will be very successful. If the market is turning faster than you; you will lose.

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