• 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!
Trade Like a Scientist – Part One: The Scientific Mindset
TraderFeed, June 15, 2007