Tuesday, March 19, 2013

Antifragile Trading (Small Losses, Big Gains)

Nassim Taleb’s latest book, Antifragile: Things That Gain from Disorder, defines a new concept, Antifragility. Operationalizing this concept in the world of sports trading would mean creating an approach that is explicitly designed to benefit from market volatility. In other words, an antifragile trading system would be characterized by a procession of small losses periodically punctuated by large gains - for example, live longshots. However, nobel laureate Daniel Kahnemann, Thinking, Fast And Slow, would point out that the pain endured by a succession of small losses will not be emotionally compensated by an iteration-ending large gain. Obviously, most humans are too fragile to handle antifragility!