So You Want to Improve Your Trading ? : Be Your Own Ideas’ Worst Enemy

A question I often get asked when I talk to people about automated and manual trading is “how can I get better?”. This simple query is obviously what most if not all traders aspire to but few ever achieve to improve themselves with the test of time and  sadly, more often than not people  end up as unprofitable traders who give up after dedicating a few months or even years to this endeavor. On today’s post I want to talk to you about what I consider the most important thing you can do to improve your trading and become not only most likely more profitable but more apt at long term survival (which is perhaps the most important thing in trading).

When most of us think about getting better at something we often believe that the best way to achieve this is through the improvement of what is already being done. My formation as a scientist gave me some very important lessons regarding this and gave me a mind set which made “moving forward” much easier for me. When we examine how science advances we can get a very good idea of how big breakthroughs happen and what in fact led to huge improvements in science for those who followed the right road.

In science the most important thing is and has always been experimentation. After we carry out observations of the natural world we then propose theories which we can use to interpret and sometimes even predict that behavior. Scientific theories are merely models which are drawn upon observations and in order to be valid they need to conform to all the experiments we can through at the theory. This is why they say that in science we test hypothesis “to their death” because the most important thing is to confirm whether something does predict or explain the phenomena we intend it to.

A common piece of advice we scientists are given when we start our research careers is quite simple : be your own ideas’ worst enemy. What this means is simply that you will make sure that you attack your idea with as many experiments as possible with the intent of proving yourself wrong, if after all of this your idea remains intact, then you might have something of value. Not only does this make your science much more sound but it often leads to the discovery of whole new phenomena that open whole new worlds to explore.

I have tried to approach trading in a very similar way, attempting to conform to what we can call “experiment”, trying to destroy my beliefs with as many tests as I can imagine. For example during the beginning of my exploration of automated trading I was very interested in low time frame systems and therefore I started to carry out simulations, back/live testing consistency tests, etc and I quickly realized that these systems couldn’t be simulated accurately on the MT4 platform. Whenever I develop a new system I stress test it as much as I can and I then put it up against live accounts to see how well it conforms in live trading to the in-sample and out-of -sample statistical characteristics derived from trading. I also often test my beliefs against tests and change them whenever the evidence to do so tells me that I am not following the right path.

Many traders are sadly very stubborn and they tend to marry systems and ideas and refuse to take into account evidence that points to the fact that what they are doing is a simple wild goose chase. The most dangerous thing you can do in trading – and also in science – is to put your beliefs as facts. Your beliefs are simply the set of ideas which you believe are true but that doesn’t change reality nor does it make the really true ideas become false. In this sense the most important thing you can is to always be in distrust of your own ideas, always try to prove them wrong and – when you do – learn from whatever discoveries you might make in the process.

The refinement of knowledge in general – both in science and trading – depends on the process of testing  ideas and changing them whenever they do not explain or match what is actually happening. We – as traders – need to be extremely open minded but also extremely careful and judicious, we need to put every idea to the test (test systems and ideas to their death) and be flexible enough to change our mindset whenever we have evidence that what we are doing is somehow wrong. This process won’t work if you’re stubborn, if you resist to change or if you fail to do your best to search for evidence that what you’re doing is wrong. You need to constantly seek for something that proves you wrong and then evolve new ideas whenever this happens, otherwise you will not advance or improve your trading.

In the end my advice for improvement is the same simple advice I got from my mentor back when I was a student: be your own ideas’ worst enemy. If you would like to learn more about my work in automated trading and how you too can also learn to develop strategies based on understanding please consider joining, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach towards automated trading in general . I hope you enjoyed this article ! :o)

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