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7 Psychological habits

  
  Education
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1. Overconfidence and optimism

Most of us are way too confident about our ability to foresee the future, and overwhelmingly too optimistic in our forecasts.

This finding holds across all disciplines, for both professionals and non-professionals, with the exceptions of weather forecasters and horse handicappers.

Lesson: Learn not to trust your gut.

2. Hindsight

We consistently exaggerate our prior beliefs about events.

Market forecasters spend a lot of time telling us why the market behaved the way it did. They’re great at telling us we need an umbrella after it starts raining as well, but it doesn’t improve our returns. We’re all useless at remembering what we used to believe.

Lesson: Keep a diary, revisit your thinking constantly.

3. Loss aversion

We hurt more when we sell at a loss than we feel happy when we (more…)

Anirudh Sethi's Lessons From 2008 : Part – II

  
  Education
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1)In panics there is almost nowhere to make money without taking excessive risk
2)Timing entries and exits to oversold & overbought conditions helps achieve low-risk/high-reward entries
3)There is no such thing as a safe investment
4)Markets are dysfunctional, corrupt, and have no oversight
5)To let a stock prove itself to me, prior to jumping in based on my analysis alone (more…)

Words of Wisdom For Traders

  
  Education
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“Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes.” ~ Jesse LivermoreTHINKINGFUTURE

“Wealth and rank are what people desire, but unless they are obtained in the right way they may not be possessed.” ~ Confucius 

“Man has the power to act as his own destroyer—and that is the way he has acted through most of his history.” ~ Ayn Rand 

“It is no measure of health to be well adjusted to a profoundly sick society.” ~ Jiddu Krishnamurti

“Men in the game are blind to what men looking on see clearly.” ~ Chinese Proverb

“The most exquisite paradox… as soon as you give it all up, you can have it all. As long as you want power, you can’t have it. The minute you don’t want power, you’ll have more than you ever dreamed possible.” ~ Ram Dass 

“If thou wilt make a man happy, add not unto his riches but take away from his desires.” ~ Epicurus (more…)

Lessons From The Wizards

  
  Education
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One of the first books I read in this business oh-so many years ago was Stock Market Wizards. It had a profound impact on my thinking about trading, psychology, risk, capital preservation, etc.

Sometime ago, I came across a good discussion of the lessons from the book at Simply Options Trading. What follows is my edited adaptation of those rules he derived from Stock Market Wizards:

    1. All successful traders use methods that suit their personality; You are neither Waren Buffett nor George Soros nor Jesse Livermore; Don’t assume you can trade like them.

     What the market does is beyond your control; Your reaction to the market, however, is not beyond your control. Indeed, its the ONLY thing you can control.

     To be a winner, you have to be willing to take a loss; (The Stop-Loss Breakdown)

     HOPE is not a word in the winning Trader’s vocabulary;

     When you are on a losing streak — and you will eventually find yourself on one — reduce your position size;

     Don’t underestimate the time it takes to succeed as a trader — it takes 10 years to become very good at anything; (There Are No Shortcuts)

     Trading is a vocation — not a hobby (more…)

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