What type of Trader are you? 25 replies
With no leverage, which type of Investment would you choose? 0 replies
What Kind Of Trader You are & Which Trading Style Suit's You? 0 replies
Which type of account shows NZD 1 reply
Example:
Whenever I hear (or read) someone that they want to make X amount of money in trading, I already know it is a lost cause because they don't understand the cognitive biases going on in their head. Don't get me wrong, I'm not shooting down people's dream. This is the typical approach (cognitive bias) when it comes to trading: " I want to make $1M".... or..... "I want to provide for my family (this is another cognitive bias that doesn't help your trading)".
Cognitive Bias: "I want to make $1M"
Question: What do you do when you have a big project to do?
Answer: 90% of the time you procrastinate because the task is overwhelming. You are not aware of this, and you end up watching youtube or wasting your time doing something else and not what you're suppose to be doing. You're setting yourself up for failure and self sabotage.
Don't focus on $1M... Instead, focus on the execution of your trading plan/system. If you focus on $1M, you will hold onto losing trades expecting them to turn around and then you get a margin call. Why don't you close your trades? because you procrastinate. When you do you close your trades? when the pain is so big and unbearable (big loss) you take action and then you close your trades. And if you're highly motivated (and you're not in the procrastinating group), several cognitive biases kicks in also. Again, setting yourself up for failure and self sabotage. You don't believe to what I just told you? it's called denial (another cognitive bias). There is a lot of research regarding goal setting and goal achievements. You'd be surprised that what you read in your typical Personal development books, research validates the opposite is true. Saying mantras or affirmations that you will make $1M or that you are a success did not perform well compared to people who acknowledge their limitations and fixing them. The moment you think about your millions, you've put the odds against yourself.
I've been profitable since 2006 and right up to date 2015. And since I was aware of such cognitive biases, it lingered in the back of my mind (until 2012) if whether I am an objectively profitable trader or am I just having a lucky streak. Anyone who's been profitable for 9 years would be easily swayed to think that they are objectively profitable and simply not lucky (due to cognitive biases), but not me. That is another story (searching for objectivity).
Peace,
CrucialPoint
DislikedCognitive Biases I saw this thread the minute you posted it and thought to myself, "No one is going to pay attention to this thread because a thread that is very crucial to one's trading development doesn't really catches a lot of attention." ... 11hrs later and only one response There are actually a lot more cognitive biases (which relates to trading) not listed on that wiki list. And one of the most crucial point in trading (which is never/hardly discussed) is being aware of your cognitive biases, consciously experiencing...Ignored
DislikedCognitive Biases I saw this thread the minute you posted it and thought to myself, "No one is going to pay attention to this thread because a thread that is very crucial to one's trading development doesn't really catches a lot of attention." ... 11hrs later and only one responseIgnored
DislikedCognitive Biases I saw this thread the minute you posted it and thought to myself, "No one is going to pay attention to this thread because a thread that is very crucial to one's trading development doesn't really catches a lot of attention." ... 11hrs later and only one response There are actually a lot more cognitive biases (which relates to trading) not listed on that wiki list. And one of the most crucial point in trading (which is never/hardly discussed) is being aware of your cognitive biases, consciously experiencing...Ignored
Disliked{quote} Yes true, though trading for a long time, I still fall into this some time. Eg, when everyone was shorting EU, I close my bottom Long too early because everyone keep screaming sell. Then after FOMC, I closed my long, and I short on top, and this time, I stay away from forums to avoid getting influence. Human tends to subconsciously or indirectly take into others' analysis or views which affect our own trading plan.Ignored
For more on this topic I recommend the light read below. Short sentences, to the point examples, and a focused presentation of 48 cognitive biases
http://www.amazon.com/You-Are-Not-So...e+not+so+smart
DislikedIt would seem to me that there is a danger here of traders spending massive amounts of time searching for the tiny flaws in their personality and chasing new ideas etc. I would agree that focusing on the 1 million goal is futile. If one has a plan that is reasonable and that others have already achieved then there is no rational reason why anyone else with a reasonable state of mind cannot duplicate that plan for oneself. The challenge is, does the individual have the same quiet tenacity discipline focus belief to carry out the plan? We humans are...Ignored