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Grit versus stubbornness

Persistence is a virtue when feedback says you are improving and a liability when it says the approach does not work.

Trading culture celebrates persistence, which is a problem because persistence is also the main cause of large losses. The same behaviour - continuing despite pain - is admirable or ruinous depending on something outside the behaviour itself.

The distinguishing question is whether there is a feedback loop showing progress. Grit is sticking with a method whose execution scores are improving and whose losses are within its measured range. Stubbornness is sticking with a method whose results have been outside expectations for a long time, defended by hope and by how much has already been spent.

Set the quit conditions while you are calm: a maximum drawdown, a review date, a runway limit. Persistence inside pre-set boundaries is grit. Persistence past them is escalation-of-commitment.

Related: escalation-of-commitment, sunk-cost-fallacy, strategy-hopping, quit-point

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