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Trade Like a Scientist
Doc Steenbarger has a terrific 3 part series on trading like a scientist. All three posts are short and easily digestable, but here's what stood out to me:
* Observation and deduction are the key to developing a trading strategy;
* Understand what is meaningful and what is random.
* Scientists have humility; They know their best theories are only approximations of reality.
* Knowledge, for a true scientist, is always provisional; Ongoing empirical tests generate further additional observations and revisions.
* Scientists remain open to data that may invalidate their hypothesis.
* Scientists focus on the process and not the outcome. A single winning or losing trade does not prove a strategy works -- but it does provide some additional data.
* The aim of Science is to understand through observable phenomna, what is going on in reality. This, Scientific traders do not "Trade Without Understanding;"
* Since all scientists understand probabilities, they never Oversize positions;
* Recognizing errors is key to an objective mind. Thus, why Traders should be prepared to admit error: never average down, and always use stop losses.
Good stuff, Doc. Thanks!
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Source:
Trade Like a Scientist - Part One: The Scientific Mindset
Brett Steenbarger
TraderFeed, June 15, 2007
http://traderfeed.blogspot.com/2007/06/trade-like-scientist-part-one.html
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