You need to be a curious open-minded good human being to succeed in Trading

Two most important ratios for trading success are Win rate and Avg Win size Vs Avg Loss size. Win rate is about traders’ ability to predict future outcome.

I re-read the book Super forecasters- Art and Science of prediction. The author is a psychologist who worked with Intelligence Advanced Research Projects Activity (IARPA) which is part of Department of Intelligence, USA. The book was about the Good Judgement Project, the author conducted for IARPA. He summarises the model super forecasters who can predict future events better than an average person as follows:

In philosophic outlook, they tend to be:

  • CAUTIOUS: Nothing is certain
  • HUMBLE: Reality is infinitely complex
  • NONDETERMINISTIC: What happens is not meant to be and does not have to happen

In their abilities and thinking styles, they tend to be:

  • ACTIVELY OPEN-MINDED: Beliefs are hypotheses to be tested, not treasures to be protected
  • INTELLIGENT AND KNOWLEDGEABLE, WITH A “NEED FOR COGNITION”: Intellectually curious, enjoy puzzles & mental challenges
  • REFLECTIVE: Introspective and self-critical
  • NUMERATE: Comfortable with numbers

In their methods of forecasting they tend to be:

  • PRAGMATIC: Not wedded to any idea or agenda
  • ANALYTICAL: Capable of stepping back from the tip-of-your-nose perspective and considering other views
  • DRAGONFLY-EYED: Value diverse views and synthesize Judge using many grades of maybe
  • THOUGHTFUL UPDATERS: When facts change, they change their minds
  • GOOD INTUITIVE PSYCHOLOGISTS: Aware of the value of checking thinking for cognitive and emotional biases

In their work ethic, they tend to have:

  • A GROWTH MINDSET: Believe it’s possible to get better
  • GRIT: Determined to keep at it however long it takes (Try – Fail- Analyse – Adjust – Try again)