Black box thinking

We’re excited about the subtle but significant changes that we have implemented.

I think all traders, whether they are proprietary, professional or retail, always struggle to find what works for them. And as you know from these posts, we are no different.

Black box thinking, the surprising truth about success’ by Matthew Syed brings home the idea that learning from our failures is paramount to any chance of eventual success.

The book, in part, draws comparisons between aviation and healthcare. Since the ’70s, and formerly a NASA programme, aviation has, in large part, been such a safety success story by learning from its mistakes. Nothing grander than that.

Aviation insists on an open-loop learning model. Flight crew, for example, operate in an atmosphere of mutual support of cross-referred checks, everyone questioned by anyone no matter what their position and an open-loop reporting facility that shares without vindication errors that have or may occur.

What has this got to do with a traded fund?

Even a highly proficient technical trader is guilty of a multitude of errors creeping into the routine of things. The nature of the game is that such mistakes take away from an account over time significantly more than a corresponding success adds.

Therefore, imagine trading in a similar way to the description above. In which we work within a team, each member graduates to a position that best suits their innate talents.

A position that leaves room for movement and innovation but benefits from an agreed plan or strategy, a shared briefing and approach appropriate to the timescale required, loose but agreeable support during trade time and an all-important regular debrief of lessons learnt.

From the observation of news reports and events, market analytical assessment, timely recognition of value and setup to the execution of the trade, the structure and its subsequent management.

We give ourselves the best chance of success by openly confronting each aspect of our trade model and learning frankly from our failures, no matter how small.