Resulting: Judging A Decision By Its Result
"Resulting" is judging whether a decision was good or bad purely by how it turned out, ignoring the information available at the time — a natural habit that quietly teaches traders the wrong lessons from both wins and losses.
A trade with a genuinely well-reasoned setup — good odds, sensible size, a plan for both directions — loses money because a low-probability outcome happened to occur. A different trade, badly reasoned and oversized, happens to win because the market moved the trader's way despite the odds. "Resulting" is the habit of judging the first decision as bad and the second as good, purely because that's how each one turned out, when the outcome was never fully within the trader's control to begin with.
Why the result is the wrong thing to grade
Any single trade is one draw from a distribution of possible outcomes, and a good decision can easily produce a bad result on any given draw, especially when the trade had real uncertainty built into it in the first place — if every good decision won, there would be no risk premium to earn. Grading the decision by the result conflates two separate questions: was the decision sound given what was known at the time, and did the market happen to move favorably. Those questions have different answers often enough that consistently resulting will actively mislead a trader about what to do differently next time.
A trader shorted a stock ahead of an earnings report based on a well-supported thesis about deteriorating fundamentals, sized appropriately for the position's volatility, with a clear invalidation level. The company beat estimates on a one-time item unrelated to the thesis and the stock rallied, stopping the trader out for a loss. Reviewed purely by result, the trade looks like a mistake to avoid repeating. Reviewed by process — was the thesis reasonable, was the size appropriate, was the risk defined in advance — the trade was sound, and the "lesson" a resulting review would teach (avoid theses like this one) would actively make the trader worse over time by discouraging correctly-reasoned trades that simply lost on this particular draw.
The pull toward resulting is strong precisely because outcomes are easy to see and process quality is not — a losing trade produces an unambiguous number, while "was this well-reasoned" requires actually reconstructing the decision. That asymmetry is why resulting has to be actively guarded against rather than assumed away.
Resulting means judging a decision by how it turned out rather than by the quality of reasoning behind it at the time, and it's a natural but misleading habit because any single trade's outcome is only one draw from a distribution the decision never controlled outright. A sound decision can lose and a poor one can win — grading purely on results teaches the wrong lessons from both.
Further reading
- Duke, Thinking in Bets