287 · Robb Reinhold - Consistency Beats Intelligence Every Time
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Deep Dive
Why did Rob Reinhold choose the name 'Flat Earth Trading Society' for his experiment?
He wanted a catchy, conspiratorial name to challenge the common belief that entry points are the most important aspect of trading, as most resources focus on entries rather than exits.
What was the main goal of the Flat Earth Trading Society experiment?
The goal was to prove that consistent position management and disciplined exits are more crucial than well-thought-out entries, using random stock selections and a systematic trading process.
What was the key takeaway from the Flat Earth Trading Society experiment?
Consistency beats intelligence in trading. The experiment showed that a systematic, rule-based approach to position management can lead to profitability, regardless of the quality of the entry.
How did Rob Reinhold select stocks for the Flat Earth Trading Society experiment?
He used random methods like Scrabble tiles, a Ouija board, and even picked stocks based on his location during travel. The selection was designed to be as random as possible to avoid cherry-picking.
What was the position management strategy used in the Flat Earth Trading Society experiment?
A 2x ATR trailing stop was used, with stops adjusted dynamically based on profit levels. If a trade reached 2x ATR profit, the stop was moved to 1.5x ATR, and at 4x ATR, it was moved to 1x ATR.
What was the average holding period of trades in the Flat Earth Trading Society experiment?
The average holding period was around 12 days, influenced by the placement of stops and the daily chart timeframe used for trading.
What was the biggest win in the Flat Earth Trading Society experiment?
The largest win was a water ETF that gained 7.5x ATR and was held for about 45 days, making it the longest and most profitable trade in the experiment.
What was the overall return of the Flat Earth Trading Society experiment?
The account grew by 15%, from $100,000 to $115,000 over the course of the experiment, which lasted nearly a year.
Why did Rob Reinhold believe that traders often struggle with discipline?
Traders often struggle because they try to rely on discipline to overcome their natural tendencies, such as overtrading or emotional decision-making. Instead, they should build systems that work around their weaknesses.
What was the significance of the losing streak in the Flat Earth Trading Society experiment?
The losing streak, which included 10 out of 11 losses, highlighted the psychological challenges traders face after winning streaks, where they often become overconfident and take on more risk, leading to drawdowns.
- Successful trading relies more on consistent position management and disciplined exits than on perfect entries.
- The Dunning-Kruger effect is common among new traders: initial overconfidence gives way to a more realistic understanding of the market.
- Early losses provided valuable lessons, and the experience gained from working alongside more experienced traders significantly accelerated learning.
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