Reblog: Do NOT Look For a Trading Strategy That Suits Your Personality


What Feels Comfortable and Natural Usually Doesn’t Work

“Why do almost all speculator lose money? They lose because successful speculation requires that we consistently do that which is psychologically uncomfortable and unnatural” – Richard Weissman

“There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win, you have to act like the minority. If you bring normal habits and tendencies to trading, you’ll gravitate toward the majority and inevitably lose” – William Eckhardt

Most of what we naturally do and think do not work in trading. Here are a couple of examples:

  • We are naturally inclined to cut our winners short and let our winners run

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stockarchitect October 16, 2017

lonestocktrader / Psychology / strategy / trader / Trading / Trading Psychology / Trading Strategy /

Reblog – Confirmation Bias: Can trading psychology affect investment?


We’re all susceptible to confirmation bias – paying more attention to our own preferred data and largely ignoring contradictory evidence. For investors, this psychological blind-spot can be very costly.

In every-day life, we like to think that our decisions are logical, rational and objective but often they are anything but.

Balanced analysis frequently goes AWOL as our pre-conceived beliefs take over. Let’s take a General Election as an illustration of this point.

Voters often seek positive news that shows their favoured candidates in a glowing light while paying scant attention to information that casts the opposing candidate in a good light.

Objectivity

If their existing belief is that their party is always strongest on say, maintaining law and order, they may place greater emphasis on campaign speeches reinforcing this claim than independent figures showing cuts in police or army numbers.

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stockarchitect August 23, 2017

Bias / Charles Darwin / Confirmation / Diversification / Investment / Objectivity / Trading Psychology / Warren Buffet /

Reblog: How to Cut Losses and Let Winners Run


Loss Aversion – Cut Losses Short & Let Winners Run

If you’ve been trading for a while, you’ve probably heard the following ubiquitous mantra of trading: “Cut Your Losses Short & Let Your Winners Run”.

Why Should You?

Stocks can literally go to zero. It happened many times before and will happen in the future, regardless of how big the company is.

MANY oil and coal companies recently filed for chapter 11 bankruptcy and their stocks got delisted. You may also remember Lehman Brother and General Motors. What happens when your stock falls off a cliff and gets delisted? You simply lose all the money you invested in that stock.

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stockarchitect August 9, 2017

lonestocktrader / Psychology / strategy / Trading / Trading Psychology / Wisdom /

Reblog: 10 Things a Trader has to Beat


To be a profitable trader you must overcome these ten things:

  1. You must beat the market benchmark you are competing against or you might was well just buy and hold that index.
  2. You must beat your emotions by following a trading plan.
  3. You must beat your ego by taking losses early when you are proven wrong.
  4. You must beat your greed by managing your position sizing to limit your risk exposure.
  5. You must beat your fears by letting a winning trade run when there is no reason to exit.
  6. You must beat your desire to predict the future by reacting to what price action is actually happening.
  7. You must beat the trader on the other side of your trade.
  8. You have to make enough money to beat your commission costs.
  9. You must not let the market beat you up with too many losses and make you quit.
  10. You must beat the naysayers who think active profitable trading is impossible.

The original post is authored by Steve at newtraderu.com and is available here.

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stockarchitect May 17, 2017

newtraderu.com / Trading Method / Trading Plan / Trading Psychology /

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