Archives of “cues” tag

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The Power of Habit: Why We Do The Things We Do

  
  Education
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The notion that success is a simple matter of following routine and sticking to good habits isn’t exactly new. But in his just-released book, The Power of Habit: Why We Do What We Do in Life and Business, Charles Duhigg explains why. An investigative reporter at the New York Times who also has an MBA, Duhigg taps into insights from biology, sports, consumer products marketing and manufacturing.

How do people kick smoking? How did Procter & Gamble turn Febreze into an also-ran into a big seller? How did Tony Dungy turn his National Football League defenses into champions? How did Paul O’Neill (the executive, not the baseball player) succeed at Alcoa? It all comes down to understanding the power of habits, Duhigg argues. “In the last ten years, our understanding of how habits work has been totally transformed, and companies take advantage of that,” he said.

People, like animals studied by scientists in laboratories, tend to see a feedback loop in their behavior. They are cued or prompted to act in a certain way, respond with a routine behavior, and then receive a reward for the behavior. “If you identify the cues and rewards, you can change the routine,” Duhigg writes. (more…)

Focus & Anticipation

  
  Education
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Focus: Once all of the little things are taken care of you can now focus on what is important, the market. This will dramatically improve your execution. You can only execute well over time if it is you and the market. You can take more intelligent risks because you have more of the RIGHT information. Have you ever been in a trade, then when you go back to review a trade, you realize you missed something important? More than likely that is a process problem. It is important to accurately attribute the importance of that information and realize that hindsight is a horrible recorder. I would rather make that decision when I can do something about it. This takes trial and error but a pattern will develop and once it does it is your responsibility to constantly monitor it for change.

Anticipation: Anticipation is key in trading because the market is always leaving cues to what it is going to do next or that what it is going to do next is not tradeable. We teach our traders to have a progression, much like a quarterback would. Anything can happen and having a progression will help you to take advantage of it.

How can you enhance perceived self efficacy

  
  Education
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Self efficacy is built through four processes:
Mastery experience
Role modelling
verbal persuasion
psychological cues.
These four are in order of importance. Most critical way to build self efficacy is through a mastery experience.

Mastery experience is basically a successful experience of mastering a task. Mastery experiences happen when the learner has reached the point where they understand the content knowledge enough to perform a task on their own or masters the task. It happens if the learner goes in to sufficient depth on material he trying to learn. It happens as a result of immersion in a particular field or task. It happens with plenty of prior exposure to the content.

At some stage the learners are able to interpret the results of their actions and use those results to develop their own capability to engage in future actions or tasks. Then the learner become auto learners. They are able to participate in tasks on a first hand basis with little or no assistance from outside influences. When you experience a intense mastery experience you get a feedback on your own capabilities. Long and sustained efforts are required for mastery experience.  (more…)

Run against the crowd, not with it

  
  Education
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This is one of the hardest things to do. It goes against every fiber of your being. We are wired as humans to look to the crowd for our cues just like an animal runs with the herd. In the animal kingdom, Penguins will run to the edge of an iceberg and stop to see if one of them actually jumps in and swims to safety without being eaten by predators. When they feel it is safe, the rest of them will make the swim with confidence.In trading, you cannot wait for a trade to “feel safe” before you take a chance with your hard earned money. You have to anticipate, listen to your gut and be willing to buy when others have lost patience or composure hitting the sell button into your waiting hands. Likewise you have to become a seller when the rest of the crowd feels safe and starts buying, only to repeat the process over and over. Going against your natural instincts will keep you safe by having better entries and exits. The rest pays for itself

Words of wisdom from Jesse Livermore

  
  Education
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No trader can or should play the market all the time. There will be many times when you should be out of the market, sitting in cash waiting patiently for the perfect trade…. ” – Jesse Livermore

“It is foolhardy to make a second trade, if your first trade shows you a loss…. As an ironclad Livermore rule, never average losses. Let that thought be written indelibly and forever upon your mind….” – Jesse Livermore

“Remember that it is dangerous to start spreading out all over the market carrying several positions. Do not have an interest in too many stocks at any one time. It is much easier to watch a few than many….” – Jesse Livermore

“As long as a stock is acting right, and the market is right, be in no hurry to take a profit…. ” – Jesse Livermore (more…)

What Warren Buffett said…

  
  Education
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W.B* For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it’s going up.
* Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.
* The important thing is to keep playing, to play against weak opponents and to play for big stakes.
* Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
* There are all kinds of businesses that Charlie and I don’t understand, but that doesn’t cause us to stay up at night. It just means we go on to the next one, and that’s what the individual investor should do. (more…)

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