Antifragile Trading Lessons

Antifragile Trading Lessons
This is a Guest Post by AK of Fallible
AK has been an analyst at long/short equity investment firms, global macro funds, and corporate economics departments. He co-founded Macro Ops and is the host of Fallible.

In this video we’re going to explain what antifragile means and how you can use it to improve your trading. And we’re going to do it with the help of Bobby Axelrod and Taylor Mason from Billions.

The antifragile concept itself comes from the famous author and quant trader Nassim Taleb. It means that a system actually becomes stronger when faced with a shock.

Antifragile, obviously, is the opposite of fragile. Fragile is something like glass, where if you hit it, the shock will shatter it. Antifragile would be like your muscles. You tear them up at the gym but then they grow stronger.

Now to really understand antifragility, you need to know how it’s different from both resiliency and robustness.  Resiliency is the ability of a system to fail, but then recover and keep going. The system doesn’t actually improve, but it’s able to restart and keep going. Robustness is the ability to resist failure in the first place. The system doesn’t improve, but it can get beat on and keep going.

So what’s all this mean for your trading strategy? Well when you build your strategy, instead of leaving it open to blowing up when a highly volatile, one off event comes around, you actually want it to make money from that event.

A great example is how George Soros “broke the bank England” back in 92’. He had a huge $10 billion short position betting that the UK would withdraw from the European Exchange Rate Mechanism and devalue the pound. And when they finally did, while the rest of world was shocked, Soros made out like a bandit. His strategy was tuned so that it would make a ton of money from that massive vol event instead of being hurt by it. His strategy was antifragile.

Make sure you watch the video above for more! And remember, stay Fallible out there investors!