How can you increase your chances of winning?

My previous book review (see: http://www.moneylife.in/article/78/6519.html) led me to attribute reason for my taking profits early, which meant smaller profits than I deserved, to lack of proper methodology. This book points me to another important aspect for it: hardwired psychological inclinations of risk aversion. It also answers why people, including me, ride loser stocks too long. Kiev is a psychiatrist who has written numerous books on related subjects. This book attempts to take another cut at the issue of successful trading by looking across a range of skill sets that are integral parts of the successful trader: a goal-oriented strategy, risk management, creative thinking, and a capacity for collaboration and leadership.

One question the book tries to answer is “How can you increase your chances of winning?” from a psychological perspective. The book explores the nature of investing and trading in terms of being a probabilistic field of endeavour and the kinds of traits and personality characteristics that must be developed to increase the likelihood of success. Kiev views the field of investing as ‘sports betting’ and that a trader can increase his/her odds of winning by learning to bet on high-probability bets. The approach that is imprinted throughout the book is to challenge oneself to be able to think originally and in terms of what is not immediately apparent. The “thinking outside the box” approach is about trusting your intuition and then developing the kind of research process that will support your hunch and not simply rely on conventional sources of information. It means investing in a lot of research to uncover expected value of a company that is beyond published reports. Traders can look for pricing discrepancy, disconnects, and other things that suggest that buying a company gives you a good shot at winning the bet in a reasonably well-defined time period, increasing your odds of winning.

Successful trading, Kiev asserts, requires an unusual and sometimes contradictory blend of intellectual and psychological abilities, including the willingness to take risks, but in a very controlled manner; the discipline to develop high-conviction trading ideas in the face of unpredictable markets and incomplete information, as well as a strong drive to win—but also accept failure. A person who is too cautious or a complete perfectionist is not a good candidate for portfolio management as much as someone who is too impulsive or an irrational risk-taker. At the end of the day, perseverance, experience, and drive serve to compensate for weakness in personality and natural talent. Kiev’s views are supported and articulated with interviews from contemporary traders and portfolio managers. This covers numerous aspects such as: Intellect, Instinct and Guts; Goal Directedness; Ability to take risk; Importance of Ingenuity; Separating Emotions and Decisions; Nurturing team players; Directing Success. These are personality traits Kiev wants hedge fund managers to understand how to look for and choose the best person for a job from the pool of highly-talented individuals.

Some of the things covered in the book may already be known to you. Other things may look obvious and you may want to acquire that personality trait. By all means go for it. My belief is that our personality is somewhat hardwired. It is something based on all our life experiences and reactions to it that are stored in our subconscious. Most of the time how we behave comes from our subconscious. It is possible to reprogram it, but it will take time and effort. It will be foolish to expect that one can develop the right blend of risk-taking ability just by reading this or any other book. Take it in a positive approach as a new beginning in a right direction. Don’t buy this book if you are a trader looking for anything other than psychological aspects to help you in trading.