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Day Trading – Trade Reluctance

  
  Education
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ReluctanceA problem that plagues all traders from time-to-time, trade reluctance, or the inability to pull the trigger has many causes. Recognizing yourself among the following Trade Reluctance Types can go a long way toward eliminating the problem. 

ALARMIST: Characterized by energy being diverted away from placing trades into over-vigilant preparation for low probability catastrophes. Habitual worrying about the worst case scenario. 

ANALYSIS PARALYSIS: Characterized by energy being over-invested in analyzing at the expense of executing trades. Preparation for making trades is out of control. Trader is a walking encyclopedia of technical information with little or no profits to show for it. 

HYPER-PRO: Characterized by energy being lost due to over-investment in the mannerisms and appearances of success. Energy is expended at the expense of goal-supporting behaviors such as analyzing trade performance or analysis for the next trading session, which is viewed as “demeaning” and “unprofessional,” and/or “shouldn’t be necessary.” Often accompanied by over-stylized use of professional jargon, name-dropping, and a reflexive need to appear better informed and more sophisticated than the “average” trader.  (more…)

4 Ways Your Brain Is Making You Lose Money

  
  Education
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brainYour brain doesn’t like to lose

Loss aversion, or the reluctance to accept a loss, can be deadly.  For example, one of your investments may be down 20% for good reason.  The best decision may be to just book the loss and move on.  However, you can’t help but think that the stock might comeback.

This latter thinking is dangerous because it often results in you increasing your position in the money losing investment.  This behavior is similar to the gambler who makes a series of larger bets in hopes of breaking even.

Your brain remembers everything.

How you trade in the future is often affected by the outcomes of your previous trades.  For example, you may have sold a stock at a 20% gain, only to watch the stock continue to rise after your sale.  And you think to yourself, “If only I had waited.”  Or perhaps one of your investments fall in value, and you dwell on the time when you could’ve sold it while in the money.  These all lead to unpleasant feelings of regret. 

Regret minimization occurs when you avoid investing altogether or invests conservatively because you don’t want to feel that regret. (more…)

Eight questions

  
  Education
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questions1. Are you willing to face your failures without recrimination?

2. Do you delude yourself with notions and rationalizations that you are limited by the nature of the marketplace or the tape?

3. Are you willing to acknowledge your successes, or are you afraid that others will be disappointed or hurt if you tell them you have succeeded?

4. Do you hold back from succeeding because of some childhood notion about not deserving to win?

5. Do you hold back in your trading because of a reluctance to let it be as good as it can be?

6. Are you held back by imagined restrictions placed on you by other obligations?

7. How much do you distort reality because of fear of the consequences?

8. How willing are you to commit 100 percent to being in the game?


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