Objectivity in Trading -Anirudh Sethi

Image result for Objectivity in tradingTrading is a very interesting field, and also a highly challenging one. Being faced with changing prices, other traders’ actions, and your expectation and hope of making the right decision, is certainly not an ideal situation to make objective choices. Many a time traders feel the stress and tension of it all to be too heavy on their minds, and as a result, their judgement is clouded. They either act too rashly, or are way too slow and cautious.

So we can all agree that for a trader to be objective is definitely no easy feat. However, an objective mindset is indispensable for a successful trader. The market is going to be offering the trader all kinds of information and data, as well as suggestions and comments being made by fellow traders. A trader needs to learn how to be objective as well as have the flexibility to use that information so as to act upon it objectively. This is however easier said than done.

In reality most traders enter the market with many notions and mindsets, as well as certain biases. The goal is to try to make the best possible trading decision, but due to these aspects it is not always the case. All human beings have an innate tendency of trying to be quite certain about a decision they make, and so they sort of seek confirmation for their actions. However in trading you cannot always be fully certain of your choices, and in the vast majority of the cases you will not be. The best you can do is to acquire information so as to make well informed decisions and as a result minimize risk. Speculating in the financial markets is normal, but no matter how much you try to speculate, you can never be completely certain.

So, the human mind basically needs to carry out analysis and evaluation of the situation, so as to then arrive at a decision. This is in a nutshell what traders do. They try to gather information, as well as use their background experience and knowledge of trading so as to evaluate the situation and make a decision according to their best judgement. They try to be objective without allowing emotions and ego to have an effect on their choice, even though it is often difficult. However, apart from that, as soon as the trader makes a decision, no matter what happens afterwards, he or she is going to feel the need to validate that decision. Regardless of how things turn out, the trader will have the tendency of defending the decision that he/she made, because every trader tries to do his/her best to remain objective throughout the evaluation and the decision making process.

Another critical issue that ties up objectivity with trading psychology is that traders will need to be objective and remain objective throughout. There are going to be times when the trader feels a tendency to trust a certain company more than another. However to be objective one needs to avoid feeling too strongly about a particular company, or a feeling or emotion. A trader thus need to be somewhat rigid in his/her thinking processes so as not to allow emotions, sentiments or feelings to affect a rational and logical choice.

Being objective also means learning how to retain objectivity throughout. This means that one needs to be consistent both in his/her analysis as well as the subsequent plan of action. In order to do this one needs to consistently adhere to the same principles which help in proper research and examination.

Evidently when you discern what it takes to be an objective trader, we may come to the conclusion that it is far from easy. Over time and through experience, traders may be able to be more objective in their actions and decisions. A trader who is just starting out in the market is more likely to feel retaining objectivity throughout to be a problem, or quite hard. However it is not impossible either. Objectivity is extremely important and one should train oneself to be as objective as possible by keeping biases, sentiments, emotions and feelings at bay, and instead focus on pertinent information and thorough research.

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