Shortcomings of IQ: Just to clear the air, let’s note first that whatever an intelligence test measures it is not quite the same thing as we usually mean by intelligence. There are two types of risk averse traders: one just won’t put the risk on ; the other one puts it on but is always looking for excuses to cut the risk near immediately. Grit captures characteristics like perseverance, resilience, ambition, and the pursuit of long-term goals. Alpha Trader is Brent Donnelly’s instant-classic book on the Mindset, Methodology and Mathematics of professional trading. Trading involves a deeply personal journey of struggle, continuous adaptation, and self-improvement.

So first we will examine the different types of trader bias, then discuss techniques to deal with each.We’re a team of elite financial professionals whose unwavering focus is empowering traders with the tools and resources to achieve unprecedented success. Each time the subject showed the experimenter their three numbers, the experimenter would tell them whether or not it satisfied the Pattern Rule until the subject was confident they figured out the rule. Brent Donnelly has been trading currencies since 1995 and is currently a senior FX trader at HSBC New York.

While Kahneman and Tversky tend to be the names we most associate with behavioral bias, confirmation bias was discovered by British psychologist Peter Wason. At some point, make sure you read Thinking, Fast and Slow (Kahneman), Fooled by Randomness (Taleb), and Irrational Exuberance (Shiller). We didn’t think the bull market was dumb and we didn’t think the internet was a world changing miracle.This is why experts often underperform laymen in tasks where one would expect the expert to outperform. Read the book: “Willpower: Rediscovering the Greatest Human Strength”, by Roy Baumeister and John Tierney. You should always give the market the benefit of the doubt and think about what you might be missing before you decide to challenge the wisdom of the crowd (i.

Trading attracts intelligent, driven individuals who see enormous financial rewards and few barriers to entry. Keynes asks us to imagine a newspaper which holds a contest where readers are rewarded for choosing which contestant will be chosen by the most other readers. Then, they read all kinds of negative media reports about the big scary thing and that scares them into selling more on Monday. Specific strategies work in specific market regimes and you need to adapt your overall style to the regime. This fundamental property of random walks is described by a counterintuitive branch of probability known as Arcsine law.Humans are built to conform: fight this instinct and make confident, independent judgments while staying humble at the same time. If yields are going up, that’s bad for earnings, bad for margins, bad for borrowers, bad for severely indebted sovereigns, etc.