Archives of “human behavior” tag

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The Wall Street Journal on China’s financial bubble in high-end sneakers.

  
  Analysis
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The Journal with a report “Chinese sneaker mania has gone into hyperdrive”

  • Speculators are flooding trading platforms and treating sneakers much like financial derivatives, including buying and selling shoe fractions
  • It’s all getting a bit much for the People’s Bank of China, whose Shanghai branch recently warned financial agencies in the city of sneaker-frenzy risk, including “mass disturbances,”
  • On trading platform Nice, a pair of Travis Scott Nike Air Force 1s is set to go on sale on Nov. 4 for around $170. Two buyers have already bought rights, similar to a call option, to buy the shoes for $1,553 and $2,667, respectively, and more than 2,000 users have said they are generally interested. More than 800 buyers are offering between $295 and $700 for a pair of Air Jordans set for release on Nov. 5 at $183.
Outstanding!

Pompeo to meet with Saudi crown prince later today

  
  Analysis
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The meeting will be in Jeddah to coordinate efforts in order to counter Iranian aggression in the region

The above is being confirmed by the US embassy in the UAE. It looks like more of a meeting to try and get the Saudis on board that Iran were behind the attack and to plot out the next course of action in response.

Just something to take note of in case we hear of anything on the matter later today.

NOW is all that matters when it comes to executing that next trade

  
Analysis, Education
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Lao-Tzu was an ancient Chinese philosopher and writer who coined the following phrase:

‘If you are depressed you are living in the past.
If you are anxious you are living in the future.
If you are at peace you are living in the present’

In relation to trading, living in the past may relate to a bad trade you made. Maybe you risked too much and took a heavy loss. Or perhaps you made an impulse trade centred on FOMO which ended badly.

If you replay negative experiences over and over, it can lead to depressing thoughts. And an inability to move forward, clean the slate and inability to execute the next trade. It can also lead to revenge trading and the urge to make up for past losses quickly.

On the flip side if you are living in the future, anxiety can set in. You end up worrying about your future trades and the money side of things. The bills you have to pay. A list of endless hypotheticals start entering your mind.

Yet when it comes to trading, or anything else in life, living in the NOW is crucial. Learning from the past and planning for the future are ok. Yet executing and focusing on what you are doing right now is most important.

We need to remember as well that the market doesn’t care about our past losses. Nor does it care about our future bills. So although worrying about these things is natural, it’s not going to help us succeed with our next trade. In fact it will likely create unwanted blockages towards future success.

Being and working in the present though eliminates negative thoughts and reduces anxiety. It means you are working afresh from a blank slate. With that next trade being completely independent of any other you have recently made.

Doing the right thing right now is what is important. Not the mistake you made last time. That is ‘old news’ and no longer matters. So focus purely on what is in front of you. Plan the trade, trade the plan and refuse to be tempted by impulse or micromanagement. Two actions that are often influenced by past actions combined with future expectations.

Trade in the NOW and affirm to yourself that the NOW is all that matters when it comes to executing that next trade.

China press response to trade truce: “Mexico, China can be partners against US pressure”

  
  Analysis
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A weekend report in the outspoken Global Times – never shy about saying what they think.

This was in a report on Mexican Foreign Minister Marcelo Ebrard’s official visit to China, which continues this week.
  • Although Trump said on Saturday that US companies could sell equipment to Huawei, security concerns raised by the US have not been completely settled
  • It will be a fierce game whose results will decide whether Huawei can develop 5G networks in Latin America.
  • Mexico is the target of pressure from the US, and that pressure is likely to continue. 
  • The US has too much influence over Mexico
  • China and Mexico can see each other as partners in development and in resisting US pressure and unilateralism
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While the ‘truce ‘ is a positive the underlying issues remain unresolved, and given the two country’s divergent goals, unresolvable.

Why Traders Fail ?Read These 20 points

  
  Education
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1. Lack of motivation. A talent is irrelevant if a person is not motivated to use it. Motivation may be external (for example, social approval) or internal (satisfaction from a job well-done, for instance). External sources tend to be transient, while internal sources tend to produce more consistent performance.

2. Lack of impulse control. Habitual impulsiveness gets in the way of optimal performance. Some people do not bring their full intellectual resources to bear on a problem but go with the first solution that pops into their heads.

3. Lack of perseverance and perseveration. Some people give up too easily, while others are unable to stop even when the quest will clearly be fruitless.

4. Using the wrong abilities. People may not be using the right abilities for the tasks in which they are engaged.

5. Inability to translate thought into action. Some people seem buried in thought. They have good ideas but rarely seem able to do anything about them.

6. Lack of product orientation. Some people seem more concerned about the process than the result of activity.

7. Inability to complete tasks. For some people nothing ever draws to a close. Perhaps it’s fear of what they would do next or fear of becoming hopelessly enmeshed in detail.

8. Failure to initiate. Still others are unwilling or unable to initiate a project. It may be indecision or fear of commitment. (more…)

The Trading Plan- Discipline

  
  Education
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Trying to win in the markets without a trading plan is like trying to build a house without blue prints – costly (and avoidable) mistakes are virtually inevitable. A trading plan simply requires a personal trading method with specific money management and trade entry rules.
Discipline was probably most frequent word used by the exceptional trades that I interviewed.
There are two reasons why discipline is critical. 

  • Its a prerequisite for maintaining effective risk control.
  • You need discipline to apply your methods without second guessing and choosing which trade to take.

A final word, remember that you are never immune to bad trading habits – the best you can do is to keep them latent. As soon as you get lazy or sloppy, they will return !

The Market Makes You Feel Bad Majority of the Time

  
  Education
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  • Unless you nail it right exactly, you will feel frustration / regret / fear in all other outcomesTraders are always choosing among the lesser of the evils. Feeling regretful is practically inescapable.
    • When you get the trade direction wrong
    • When you got out too early
    • When you got out too late
    • When you miss a trade
  • Regret Theory says that people have the desire to avoid future regret when they make their decisions.

8 Key cognitive biases to be aware of…

  
  Education
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  1. Loss Aversion… A preference for avoiding losses over acquiring gains
  2. Sunk Cost Effect… Treating money already spent as more valuable than money that may be spent in the future
  3.  Disposition Effect… A tendency to lock in gains and ride losses
  4.  Outcome Bias… A tendency to judge a decision by its outcome rather than the quality of the decision at the time it was made
  5.  Recency Bias… A tendency to weigh recent data or experience more than earlier data or experience
  6.  Anchoring… A tendency to rely too heavily or anchor on readily available information
  7.  Bandwagon effect… A tendency to believe things because other people believe them
  8.  Belief in Law of Small numbers… The tendency to draw unjustified conclusions from too little information

Enjoy ( Must Read )

  
  Education
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Paul Singer

From Forbes:

Coming off a huge debt deal with Argentina, hedge fund billionaire Paul Singer’s advise is to be wary of expert advice. “The important turning points in markets are never identified with precision in advance by ‘experts’ and policymakers. This lack of foresight is not surprising, because markets and the course of the economy are not model-able scientific phenomena but rather are examples of mass human behavior, which are never predictable with anything like precision,” says Singer. “But what is surprising is that even the most sophisticated investors, traders and commentators continue to rely on predictions issued by those who have no record of success at such forecasts.”

Nice.

42 Wisdom Points For Traders

  
  Education
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  1. First Things First
    You sure you really want to trade ? It is common for people who think they want to trade to discover that they really don’t.
  2. Examine Your Motives
    Why do you really want to trade ? Did you say excitement ? Then don’t waste your money in market, you might be better off riding a roller coaster or taking up hand gliding.
    The market is a stern master. You need to do almost everything right to win. If parts of you are pulling in opposite directions, the game is lost before you start.
  3. Match The Trading Method To Your Personality
    It is critical to choose a method that is consistent with your your own personality and conflict level.
  4. It Is Absolutely Necessary To Have An Edge
    You cant win without an edge, even with the world’s greatest discipline and money management skills. If you don’t have an edge, all that money management and discipline will do for you is to guarantee that you will gradually bleed to death. Incidentally, if you don’t know what your edge is, you don’t have one.
  5. Derive A Method
    To have an edge, you must have a method. The type of method is not important, but having one is critical-and, of course, the method must have an edge.
  6. Developing A Method Is Hard Work
    Shortcuts rarely lead to trading success. Developing your own approach requires research, observation, and thought. Expect the process to take lots of time and hard work. Expect many dead ends and multiple failures before you find a successful trading approach that is right for you. Remember that you are playing against tens of thousands of professionals. Why should you be any better ? If it were that easy, there would be a lot more millionaire traders.
  7. Skill Versus Hard Work
    The general rule is that exceptional performance requires both natural talent and hard work to realize its potential. If the innate skill is lacking, hard work may provide proficiency, but not excellence.
    Virtually anyone can become a net profitable trader, but only a few have the inborn talent to become supertraders ! For this reason, it may be possible to teach trading success, but only upto a point. Be realistic in your goals.
  8. Good Trading Should Be Effortless
    Hard work refers to the preparatory process – the research and observation necessary to become a good trader – not to the trading itself.
    “In trading, just as in archery, whenever there is effort, force, straining, struggling, or trying, it’s wrong. You’re out of sync; you’re out of harmony with the market. The perfect trade is one that requires no effort.”
  9. Money Management and Risk Control
    Money management is even more important than the trading method. 

(more…)

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