Archives of “January 11, 2019” day

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Six steps for Traders

  
  Education
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  • Define the question
  • gather information and resources
  • form hypothesis
  • perform experiment and collect data
  • analyze data
  • interpret data and draw conclusions that serve as a starting point for a new hypothesis.

1. Define the question: What is it exactly that you are trying to achieve? Are you shooting for high returns with high risk, long term gains with minimal risk, day trading, swing trading, position trading? Are you trying to make enough money to buy a new car or enough to buy a yacht? First define what it is that you want out of your trading!

2. Gather information and resources: What will be the best route to achieve your trading goals? Are you going to be a stock trader, a futures trader, a forex trader? Maybe everything? Doing the necessary research and taking the time to really get to know your market/markets is absolutely key to successful trading. Some people make great futures traders but horrible stock traders and vice-versa, while others are able to dabble in a little bit of everything and be successful. One way to see what fits you best is to try trading a little bit of everything and see where you feel the most comfortable. Start with small accounts and see what fit is a good one for you.

3. Form hypothesis: This is the fun part and where you get to design your “system” or “rules” by which to trade. Does your trading hypothesis revolve around chart patterns, trendlines, support and resistance, or are you more of a numbers kind of person that trades strictly off price? Do you use indicators? Maybe you are a programmer that has developed an algorithm. Whatever it is I believe it is important to form a hypothesis and then… (more…)

10 most common biases affecting the psychology of investing

  
  Education
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Read on below for our list of the 10 most common biases affecting the psychology of investing.

 
 

1) Anchoring & Adjustment:  This combination occurs when initial information unduly influences decisions by shaping the view of subsequent information.  Once the “anchor” or initial information is set, there exists a bias for interpreting other information around the anchor.  Car salesmen frequently use this tactic when presenting an initial sales price, making the subsequent negotiated prices seem lower than the initial price even though they are still higher than what the vehicle is actually worth.
 
2) Attribution Asymmetry:  The concept here involves people’s tendency to attribute success to internal characteristics (such as talent and innate abilities) and to attribute failures to external factors (like simple bad luck).  Research has shown the reverse to be true when evaluating the successes and failures of others.  The lesson here is most valuable when you hit a “hot streak.”  When you experience speed bumps, don’t be quick to write them off as poor luck – there could be a fundamental problem with your strategy.
 
3) Choice-Supportive Bias:  By distorting recollections of chosen courses of action versus the rejected courses of action, people tend to make the chosen outcomes seem more attractive that the foregone ones.  Just as people more frequently remember “good” memories than they do “neutral” or “bad” memories, the belief that “I chose this option therefore it must have be superior” can lead to a false recollection of the ultimate outcome.  Learn from your mistakes – don’t forget them.
 
4) Cognitive Inertia:  This is just psychological speak for the unwillingness to change thought patterns in light of new circumstances.  Quite simply, do your homework and keep up on your investments.  If a company slashes guidance, for example, perhaps you should consider altering your investment accordingly. (more…)

Madame Market

  
  Education
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If you have the feeling that the market has a split personality, one day out to shower you with peace and blessings and the other to punish mercilessly, it can only mean that on some level you are still taking it personally.

Think of it this way – there are too many players with too many conflicting ideas about market direction for it to ever form one cohesive personality. The only exception I have witnessed to this rule is when fear clearly dominates the scene, and ironically these are times that are the easiest to trade.

The highest attainment for a traders developing psychology is to achieve what has been called “intellectual purity” – that is the state free from emotional reactiveness to market behavior; the ability to accept both reward and punishment with equanimity and understanding.

That said, we know that big players perform ‘market sweeps’ to take out stops at sitting duck levels, so we can at least attempt to protect against that. The main point though is to struggle against any dimly forming impression of the market being a single entity with a personality.

That is an illusion.

10 Motivational Thoughts

  
Education, Life
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1. You’re going to kill it today

I love this phrase because it puts you in the right mindset. You will kill it today. Youcan push yourself harder and finish that monumental task you’re facing.

2. Think outside of the box

There’s a reason this phrase exists. Creative thinking is what can help you form a strategy in business that actually works, rather than relying on the same old approach.

3. This is your moment

What does it mean to say this is your moment? For starters, both you and Mark Zuckerberg or Elon Musk have exactly 60 seconds to spend in a minute. You are equals. Make the most of the time you have.

4. The issue you are facing is not insurmountable

Most of us don’t face the challenge of how to get to Mars and back or invent a new mode of transportation. The challenge you are facing today is likely not as insurmountable as you think it is, especially in comparison to other tasks.

5. You are surrounded by a smart team to help you achieve great success

Look around you. Make sure you take account of your employees and co-workers and the skills they offer, because they can help you press ahead and succeed.

6. Dig hard, and you will find the right answer

Stress is often caused by not having an answer to a burning question. Start your day with the attitude that you will find the answer. Make the assumption you will solve problems.

7. You are the only person with your exact blend of talents and skills

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