How To Improve Decision Making Skills

14 нояб. 2022 г.

Hello traders,

All the below are based on my preferences, I don't give any financial recommendations and I have nothing to sell you with this article.
I'm sharing content because I see a lot of traders being/becoming broke and I don't want you to be one of them.

Decision & Outcome

As a trader, I often noticed a disconnect between the right decision and the right outcome.

If you read my previous content, I talked about repeating successful trades, finding a trading strategy that works and keep trading it over and over again.

Your decision-making process in the most valuable thing that you have.


It’s what make you decide who you’re going to marry, what business opportunity you’re going to pursue, which mentors you’re going to follow, what assets you’re going to trade etc…

You could take the money away from the most successful traders or entrepreneurs and they’ll make it back again.

Ray Dalio, Elon Musk for example, lost everything and made it all back.

The hardest part about trading (and life in general) is you can make the right decision and have the wrong outcome.

Warren Buffet

Warren Buffet says “I wouldn’t touch Bitcoin” because it’s speculative, has no intrinsic value and would buy it only because someone else will buy it at a higher price.

Plus, a Bitcoin doesn’t produce anything… unlike a stock that produces dividends….unlike some real-estate that produces some rental income…unlike a business spitting out profit.

Those who listened to him chose to not buy Bitcoin years ago.

And until 1 year ago, the amount of money if would have been worth would have been a lot more.



Was the decision wrong? Or was it that the outcome did not match the quality of the decision?

If you’re going to change the way you made decisions because a decision you made in the past ended up bad, you have to apply the same decision making context/framework to everything else.

If I say, I’m now going to be a speculator - someone who buy things in the hope to sell it later for more even though the things themselves don’t have more value.



If I choose to start making this kind of decision, I have to think about all the other investments I would have and lost money on as a result of that decision making framework.

I heard this first from Ray Dalio.

Ray Dalio

He said, the hardest things is passing up on an opportunity and then seeing it do really well.

If I were to use the decision framework that would have made that deal a winner then I’d have to apply that same framework to all the other trades that would have been losers.
And my net net of having that decision making framework would ultimately cause me to lose.



This has been one of the most powerful concept for me as a trader because it allows me to separate the outcome from the quality of the decision.

Most speculators don't make money so that's why even if I feel pain when assets I don't own go up, I comfort myself thinking I made the right decision to choose to only trading cryptocurrencies and not holding any long-term.
And god bless..... I was right based on the events from last week #FTX

Reflecting on my trading

It’s not because I missed some opportunities or failed some trades that my decision-making framework was wrong.

My father and mentor taught me during my first year to only trade based on a convergence of indicators - to never use fundamental analysis nor blockchain analysis for those trading cryptos.

My decision-making process is 100% based on the chart and nothing else.



Whenever I get a bad outcome but traded my system as I should, it’s okay as I know overtime it gives me more winners than losers.



However, if I trade based on something I read on social media then more often than not, I end up losing money.

I've been trading using the same trading system for almost a decade - the convergence of indicators used encapsulates automatically a list of checkpoints verifying if a trade has enough momentum/strength/volume for me to consider whether I should take it or not.

Quotes of the day

- "We all make choices, but in the end, our choices make us." — Ken Levine

- "Good and evil both increase at compound interest. That is why the little decisions you and I make every day are of such infinite importance." — C.S. Lewis

- “It's not about making the right choice. It's about making a choice and making it right.― J.R. Rim,


I'll keep bringing a few articles like this every week because it helps me clarifying my thoughts AND giving back to the community makes me feel good about myself somehow :)

Thank you for reading
Dave