Skip to content
GetProfitable
Search
Dictionary

Confidence calibration

Training your stated confidence to match reality, so that things you call 70 percent likely happen about 70 percent of the time.

Calibration is a measurable skill and most people start badly calibrated, usually overconfident in the middle range. It improves with scoring, and only with scoring.

The method is unglamorous. Before a trade, write the probability you assign to hitting target before stop. Do this for a hundred trades, bucket them, and compare stated probability with realised frequency. The gap is your calibration error, and it is usually an education.

Calibration pays directly, because position size should track confidence. A trader who cannot tell a 55 percent setup from an 80 percent one has no basis for varying size, and varying it anyway is just mood expressed in contracts.

Related: overconfidence, luck-vs-skill, behaviour-journal, conviction-vs-certainty

Educational only, not advice. Spotted an error? Post in Site Feedback.