'Decision Traps': Improve Your Decision Making Skills to Become a Better Trader

by: Mercenary Trader

By Jack Sparrow

One of my all-around favorite quotes on trading is actually about poker. It comes from cash game pro Tommy Angelo, who says:

The best way to get better at poker is to get better at everything and let poker rise with the tide.

An intimidating thought for some. To really up your game (be it poker, trading, or something else entirely) you have to improve as a competitor. As a human. As a thinking, acting, decision-making machine.

For others, though, this thought is not intimidating but inspiring. “Raising the game,” i.e. getting better at everything, is part of the attraction in the first place.

To that end, trading is all about making decisions. And making good decisions is not just an art, but a skill set — an area of focus where you can learn and practice and improve.

"Decision Traps" is a useful book in this regard. The cover is over the top — brilliance will not be bestowed upon you — but thinking about the act of decision making in and of itself can be beneficial.

In that vein, here are some of my favorite “food for thought” quotes from the text:

"Decision Traps" Food for Thought Quotes

  1. To learn consistently, most people need not only to understand their own biases, but also to improve the quality of feedback they receive.

  2. To a large extent the world seems to conspire against learning.

  3. We synthesize and integrate new information into old knowledge. Like a glass of red wine poured into a bowl of clear water, the new blends with the old. Thus, it becomes impossible to reverse the process.

  4. Our minds are not filing cabinets that store information the way it came in. Instead, we edit the information heavily, cut it up into pieces, and file the edited extracts in multiple parts of our minds, depending on what they are associated with.

  5. We all know the false clarity of hindsight. Events may seem inevitable in hindsight, even though they might have been very hard to predict beforehand.

  6. Because we like to believe that we caused successful outcomes and we like to rationalize that we weren’t responsible when things turned out badly, most people suffer from an attribution bias that can destroy useful feedback.

  7. The illusion of control and accompanying false claims of credit for good outcomes are firmly rooted biases to allay our deepest fears about an uncontrollable world.

  8. …only by recognizing the role of chance in success can you realistically learn which of your actions you should carefully repeat and which could be improved. Falsely claiming credit is an important barrier to learning.

  9. Why don’t people learn from their experience? For one, the data we receive can usually be interpreted in more than one way. And even when the evidence is clear enough that we should be able to learn from it, we are naturally biased to interpret it in a way that preserves our positive self-image.

  10. People do not learn from experience as easily as you might expect — even intelligent, highly motivated people.

  11. If you understand your biases, know how to create good feedback, and can interpret feedback realistically, you can consistently turn your experiences into reliable knowledge — perhaps for the first time.

  12. Everyone, from the greatest genius to the most ordinary clerk, has to adopt mental frameworks that simplify and structure the information encountered in the world.

Disclosure: As active traders, authors may have positions long or short in any securities mentioned. Full disclaimer can be found here.