Unsent: counterintuitive much?4 min read

Haha. Good morning!

I traded yesterday >_< 

You know how I have always been saying that trading is something I want to master and how I really love it… Well, when I was getting all those successes in the past few months, I did not really believe in that. It was more lip-service. But yesterday I think I made a shift. I feel like I’m a beginner again — not that I had forgotten how to trade — but that I am excited about learning again and am starting to fall in love with the process and the grind this time round.

I have always dreaded trading small sizes, but now I can see how it’s necessary to move backwards before I can move forward. I need to fix my risk management and that requires me to trade smaller to internalise those concepts before I can step up my trading size again.

This reminds me of the paragraphs in Top Dog that I sent a while back. 

  “Additive counterfactuals are what we might have done — but it didn’t occur in reality. Subtractive counterfactuals are things that actually occurred in the past, that we’d subtract — thinking of how things would be different if it hadn’t really happened. An additive counterfactual is, ‘if only I had driven towards the hoop…,’ while a subtractive counterfactual is like, ‘if only I hadn’t missed the shot.’

  A subtractive counterfactual usually expresses regret over a mistake or a failed strategy. An additive counterfactual sees new strategies and options — it adds to the choices available if the situation happens again.

  Researchers — including Kray, Keith Markman, and Adam Galinsky — have tested the efficacy of counterfactuals in various scenarios, such as sales pitches, negotiations, flight training, and athletic tasks. People who look back on their performance with subtractive counterfactuals perform worse the next time. Those who employ additive counterfactuals perform better over time. This is true both in experimental studies (where subjects are told to reflect in one style or the other) and in naturalistic studies (looking at what people really do.)

  By thinking through different versions of ‘if only this had happened instead,’ you can avoid some of the blind spots due to overconfidence. You can predict problems that may arise, and then rerun the situation in your head until you’ve figured out a solution. 

  In effect, additive counterfactuals trigger a problem-solving mindset. Additive counterfactuals activate regions of the brain that would otherwise be deactivated during positive thinking, or even experential learning. When engaged in counterfactual thinking, the lateral frontal polar cortex, dorsomedial frontal cortex, and posteromedial cortex seem to operate as a network. Through this interaction, the brain identifies the best road not taken and retains this information until the next time you have to make a similar decision.

  The benefit of activating this network exists even if you can’t spot the solution right away. Counterfactual thinking seems to prime the brain to think more creatively; it readies the creative neural networks. Research has shown that people do better on creative-thinking tasks after having ben asked to mentalise a series of counterfactual thoughts. When faced with a unique problem, a scenario that wasn’t previously anticipated or considered, they’re better at finding solutions.”


Well it’s not exactly related to the zen concept of taking the backwards step/ the need to contract before expanding, but I think it’s interesting how often the default option that most of us do in daily life tends to lead to poorer results. Left on our own often we would not realise the need to slow down and move backwards before we can move forward; we would not realise the need to slowly unwind our unhelpful behaviours and habits before we can make larger progress. Similarly, most of our default mode of thinking lies in subtractive counterfactual rather than additive counterfactuals and that hurts our performance. I think this issue exists in the positive-thinking philosophy as well: by default we tend to focus on the negatives; some people take it to the other extreme and try to be positive all the time. Perhaps the quote by George Leonard in Mastery best expresses the right option: “Acknowledge the negatives; accentuate the positives.”


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