StockFetcher Forums · Stock Picks and Trading · How does your mood affect your trading<< >>Post Follow-up
23 posts
msg #121930
Ignore spin85
11/6/2014 1:33:28 PM

looking for some feedback. Thanks!!

7,051 posts
msg #121937
Ignore karennma
11/6/2014 2:57:02 PM

Actually, for me personally, it's the reverse ...
my trading affects my mood, which is why sometimes, I have to take very long breaks.
The last one lasted several months.

4,599 posts
msg #121940
Ignore Kevin_in_GA
11/6/2014 4:00:00 PM

I find that the results of recent trading activity influence me - I am more cautious entering new trades after a string of losses and more likely to be less cautious after several good trades in a row. That's human nature I guess, and why I try to use purely mechanical strategies as much as possible.

976 posts
msg #121941
Ignore guspenskiy13
11/6/2014 4:58:29 PM

Your mood and trading are two interconnected entities.

just as Kevin said, the better I trade - the more arrogant and less cautious I become. While you really need to stay humble no matter what you achieve.

Unfortunately our mind has biases.

There is representation bias - we assume that the daily bar chart is the market or our favorite indicator is the market.

It comes with reliability bias - we assume that something is accurate - while it may not be.

There is lotto bias - we want to control the market and we focus on our entry, where we can force the market to do lots of things before we enter; but unfortunately when we enter - the market is going to do whatever. The golden rule of trading has nothing to do with entry.

There is conservatism bias - we see patterns where none exist and easily get convinced that they have a meaning; once we believe we have found a pattern and become convinced that it works - we will do anything to avoid evidence that it doesn't work.

There is randomness bias - we assume that markets are random and have many tops and bottoms - - but even random markets can have long streaks.

There is gamblers bias - we tend to think that the probability goes up for a win after a losing streak or up for a loss after a winning streak.

There is "conservative with profits and risky with losses ratio bias" - we tend to take profits quickly and give losses some room.

There is "my-current-trade-or-investment-must-be-a-winner" bias - which is at the root of all biases. Being right has nothing to do with making money.

We don't trade or invest in the markets, - we trade or invest according to our beliefs about the markets. - Van Tharp.

Personally, in my observations I've noticed:

1) If I'm impatient to buy or sell something - I probably shouldn't do it. When I really want to trade - that usually results in poor timing and sometimes completely wrong decisions. I'm not saying that you shouldn't want to trade - but there shouldn't be any hype in the decisions - which often comes when, for example, you don't have any positions.

2) I plan well ahead all of the opportunities - but I try to focus on multiple instruments rather than one or two. I believe that decreases the chances of having any biases - I do not "over-think" as I'm focused on diverse price-actions. IMO it's really easy to develop a bias when you have a plan to trade this single instrument in the way you want it - and you just sit in front of one chart all day.

3) Lastly, I think that I should only trade when I'm in the neutral mood. Complete calmness, even apathy. With that mood and zero biases, supported by a good plan/ get pretty good odds.

StockFetcher Forums · Stock Picks and Trading · How does your mood affect your trading<< >>Post Follow-up

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