Jan 072011

I saw someone tweet this the other day and I found it really interesting.  I highly recommend watching the video.  Kathryn Schulz is an expert on being wrong and what she has to say is highly relevant to trading:

Kathryn Schulz: Being Wrong from PopTech on Vimeo.

Kathryn Schulz is an expert on being wrong. The journalist and author of “Being Wrong: Adventures in the Margins of Error,” says we make mistakes all the time. The trouble is that often times being wrong feels like being right. What’s more, we’re usually wrong about what it even means to make mistakes–and how it can lead to better ideas.

I plan to get her book too.

It reminds me of a story in How We Decide about the captain who “knew” he was on course and flew his airplane straight into a hill.  Reminds me of times when I just “knew” the market would top out yet it never did.  Schulz also talks about how our memories fail us.  It’s odd how that works but I always remember my performance to be much better than it was.  I somehow forget the losses.  That’s why I use excel spreadsheets.  Speaking of spreadsheets, I’ll share my results this weekend.  Have a good one.

  7 Responses to “Interesting video on being wrong”

  1. Thanks Michael: I will watch this video on the weekend.

    In the spirit of sharing – check out this website: http://www.andrewmenaker.com/

    It has some great advice on trading psychology.

  2. The bottom line is: in order to make money in trading you have to be more often and/or bigger right than wrong!

  3. I would summarize the video as it applies to trading as this:

    – it’s ok to be wrong so make it cost as little as possible
    – we must be careful when we’re sure we’re right – consider all possibilities and how we could be wrong

  4. agree Michael,
    in addition, I think the cliche “Do you want to be right or make money” is not only wrong but very dangerous for traders because it divorces right from making money and allows us to believe we can make money while being wrong. That’s why we often know we’re wrong but we stay in a losing position because cliche taught us ‘you don’t have to be right to make money’ or ‘we can make money by being wrong’.

    The truth is by being wrong we can’t make money… Not in a long run, and that is what counts, long run, not this one particular trade!

    Not to mention that this cliche subliminally says ‘making money is wrong’ – notion so prevalent in todays general society.

  5. FYI I was going to buy her book, but one of the amazon comments convinced me to try Mistakes Were Made (but not by me) first. I’m about 3/4ths of the way through it, and I am really liking it.

  6. Richard – Thanks for that recommendation, will check that one out. It’s available in audio and Schulz’s isn’t so that is a deciding factor (I love to listen while running/walking).

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