BASE RATES & PROBABILITY CALIBRATION
Plain English
The most underrated PM skill is calibration: knowing when 70% really means 70%. Most traders are over-confident on their picks. Tracking your accuracy over many trades is how you find — and fix — your bias.
Going deeper
Calibration is measured by comparing your stated probabilities to actual outcome rates. A well-calibrated trader's 70%-confidence trades win 70% of the time across 100+ samples. Over-confidence (claiming 80% when reality is 65%) is the most common bias and the most expensive — it causes oversized positions on weak edges. Use base rates as anchors: how often does a sitting president win re-election? How often does a Fed-funds-futures-implied probability match the eventual outcome? Calibration tools include FiveThirtyEight, Good Judgment Open, and Brier-score self-tracking.
Examples
Brier score tracking
Track every trade with: stated probability, contract, outcome. After 50 trades, compute average Brier score. Lower = better calibrated. Improving from 0.25 to 0.20 over a year = real measurable progress.
Anchoring to base rates
Sitting incumbent presidents win re-election ~67% of the time. Start your election forecast there, then adjust up/down for specific factors. Pure-vibes forecasts are usually mis-calibrated.