Destructive vs. constructive feedback

One concept I haven't heard people in the trading community discuss much is the impact of previous trading results on future results. 

You'll hear sound advice on how you should not allow a previous trade/investment to influence how you behave in the future, and we've all heard the phrase "past performance is not an indicator of future results", but how realistic/true are those things? The past couple of years have shown me that feedback from how well you do can be pretty influential in shaping biases and confidence levels. There's also the mathematical reality of past performance influencing future returns, i.e. the ability to take on more risk and potentially make more with a bigger pot, and the opposite when incurring losses. But from a purely behavioral standpoint, one's ability to stick to a plan/methodology is often highly shaped by the recency bias of your PnL. 

Said in more plain English, a bad trade or two can set you off into a downward spiral of destruction far beyond the last couple of trades!! My advice is to you is to step back, step away from your screen, and look at the bigger picture when you have a losing streak to prevent this from happening. This is a game of probability, where a setback may take a bit of time to recover from, but one that you must live with if you are to see the fruits of your trading system play out over time. "Destructive feedback" is essentially allowing your negative emotions to trigger further trading pitfalls (like going on 'tilt').

Who knows how many potentially incredible traders got discouraged and simply left the markets after initial bad results. In this case, future results ($0) is definitely a function of previous results (big loss). This is similar to how talented entrepreneurs often get hosed by bad market-product fit, often due to bad timing or factors beyond their control. The ones with an unrelenting fire inside persevere despite their failures, so maybe that's an element of incredible traders/entrepreneurs that isn't reflected in the more tangible aspects of the game. They see failures as windows of opportunity into improvement, i.e. deconstructing their causes and turning them into constructive feedback.

This is where being immersed in one's craft comes in handy. A true fisherman will enthusiastically come back to fish even after a day of catching nothing (been there, done that myself). You'll also see top athletes bounce back as if they didn't have one of the worst performances in their career, or if they continue to have bad outcomes, something has really broken their spirit (like recent cases w/ Naomi Osaka and Simone Biles). Similarly, poor trading can sabotage future trading, but you need to be cognizant of your mental/emotional state before proceeding. Even automated systems have a human behind the controls, and crazy stuff can happen if the controller goes off the rails.

Good trading everyone and stay safe out there!