3 EMOTIONAL FLAWS THAT IS KEEPING YOU UNPROFITABLE
🚨 Once you avoid them your trading will skyrocket (especially number 3)
Open th~read 👇
🚨 Once you avoid them your trading will skyrocket (especially number 3)
Open th~read 👇
Listen;
Our brain can be lazy - most of the time.
It likes to conserve energy and find shortcuts whenever possible - to a point where it's wrong.
This leads to Cognitive biases - which are judgement based on our experiences and beliefs...
... rather than objective evidence.
Our brain can be lazy - most of the time.
It likes to conserve energy and find shortcuts whenever possible - to a point where it's wrong.
This leads to Cognitive biases - which are judgement based on our experiences and beliefs...
... rather than objective evidence.
These biases can lead us to make bad decisions, especially when trading the financial markets.
So below, I'll share 3 cognitive biases you should watch out for...
And how to avoid them.
Ready?
Lets dive ⤵️
So below, I'll share 3 cognitive biases you should watch out for...
And how to avoid them.
Ready?
Lets dive ⤵️
1. ANCHORING BIAS:
This describes how you over-rely on the first piece of information you see.
Every other decision is then silently 'anchored' to the first point.
Example ⤵️
(a) You heard about BTC at $1k and didn’t invest. It goes up to $5k.
You don't want to buy anymore..
This describes how you over-rely on the first piece of information you see.
Every other decision is then silently 'anchored' to the first point.
Example ⤵️
(a) You heard about BTC at $1k and didn’t invest. It goes up to $5k.
You don't want to buy anymore..
..because to you it’s too expensive.
But that’s because you’ve anchored it to $1k. What if it goes to $100k?
(b) A token peaked at $200 per coin. Now it’s at $15.
Your gut instinct says it’s a good deal...
But all that’s in the past. How does it's utility / road map look now?
But that’s because you’ve anchored it to $1k. What if it goes to $100k?
(b) A token peaked at $200 per coin. Now it’s at $15.
Your gut instinct says it’s a good deal...
But all that’s in the past. How does it's utility / road map look now?
2. OUTCOME BIAS:
This one is a bit more subtle;
It refers to using only the outcome (The amount of Profit or Loss) as an indicator for the quality of your trading decision.
This one is a bit more subtle;
It refers to using only the outcome (The amount of Profit or Loss) as an indicator for the quality of your trading decision.
While long term P and L is a good indicator for the quality of your trading decisions (e.g. the amount of P/L after 1 month shows how good you did that month),
you can't use P/L to evaluate trading decisions on the short term, because remember:
No strategy is 100% profitable.
you can't use P/L to evaluate trading decisions on the short term, because remember:
No strategy is 100% profitable.
If your strategy has e.g. a 70% winrate...
It means that even if you followed your model perfectly, there's still a 30% or more chance of getting a loss,
therefore a loss doesn't necessarily mean your trading decision was bad.
It means that even if you followed your model perfectly, there's still a 30% or more chance of getting a loss,
therefore a loss doesn't necessarily mean your trading decision was bad.
3. CONFIRMATION BIAS
[ the most dangerous of them all ]
This is the human tendency to search for, favor and use only information that confirms what they already want to believe...
...while being ignorant of the confirmations of the opposite.
[ the most dangerous of them all ]
This is the human tendency to search for, favor and use only information that confirms what they already want to believe...
...while being ignorant of the confirmations of the opposite.
You keep reinforcing what you already believe.
Let's say you're buying a token, and you believe it will do 100x...
You only follow people who say good things about the token.
Amd you ignore every red flags and negative data that suggests otherwise.
Let's say you're buying a token, and you believe it will do 100x...
You only follow people who say good things about the token.
Amd you ignore every red flags and negative data that suggests otherwise.
Confirmation bias can lead individuals to make investment decisions that are not based on a balanced and objective assessment of the risks and rewards.
This doesn't only apply to trading, but definitely does play a big effect in trading, especially for beginners.
This doesn't only apply to trading, but definitely does play a big effect in trading, especially for beginners.
HOW TO STOP COGNITIVE BIASES ??
1. Reflect:
Think about some of the mistakes you’ve made in the past. How many of them were caused by cognitive biases?
2. Create a checklist:
Whenever you make an investment decision, you go through it.
It’ll keep you aware of thinking flaws.
1. Reflect:
Think about some of the mistakes you’ve made in the past. How many of them were caused by cognitive biases?
2. Create a checklist:
Whenever you make an investment decision, you go through it.
It’ll keep you aware of thinking flaws.
3. Develop systems:
Systems are a set of processes and decision-making criteria.
For example, determining when you’ll cut losses or take profits before you enter the trade.
Do this before, and not while you're in.
Once you’re in the trenches, it’s easy to become emotional.
Systems are a set of processes and decision-making criteria.
For example, determining when you’ll cut losses or take profits before you enter the trade.
Do this before, and not while you're in.
Once you’re in the trenches, it’s easy to become emotional.
And that's a wrap for now.
Found this helpful?
• Retweet the first tweet at the top to help other traders learn too.
• And follow me (@dnatechbro) for more.
• Dont forget to do more research on this topic.
Happy trading 🥂
Found this helpful?
• Retweet the first tweet at the top to help other traders learn too.
• And follow me (@dnatechbro) for more.
• Dont forget to do more research on this topic.
Happy trading 🥂
PS:
If you're looking for funding to elevate your trading;
I recommend @fundingpips because they have the best trading Conditions for you,
And also offer the cheapest plans in the whole industry 💯
Sign up with link below⤵️ to get 5% discount
➢ app.fundingpips.com
🥂
If you're looking for funding to elevate your trading;
I recommend @fundingpips because they have the best trading Conditions for you,
And also offer the cheapest plans in the whole industry 💯
Sign up with link below⤵️ to get 5% discount
➢ app.fundingpips.com
🥂
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