comparing a trading Decision.

Discussion in 'Psychology' started by Sun Light, Jul 31, 2011.

  1. When a trader takes a trading decision, he is individually responsible for it 100%. And result of that action gives result in binary. Win or loose.

    How many other real life situations there when a individual is responsible for a decision 100% and result is only binary? Just curious.
  2. check out "The House Advantage" on the educational forum. There's a whole boring Utube video that discusses exactly that question.

    The jist of it is should a "right decision" be based on outcome or probability?
  3. I watched the video. It is nothing much related to what i am asking.

    I just could not find many examples in day to day decisions like what i am asking about. If i work in company, my every decision is shared by several others, team efforts. also outcome is never 100% fail or success.

    Same at home. anything that can go bad, I can blame spouse equally.
    may be some individual game like tennis, yes.

    I am not saying that there is nothing else there like trading. I am just saying that, it is a unique nature of this decision making challenge.

    Obviously, next question will be if it is so, then are we as an individual really cut out for this challenge?
  4. I guess it depends on if you "fit in" or not. Most of my ancestors ended up here because they were outcasts, so for them, trading was more normal than being part of a team (although some of them did have very good wives and families.)

    If you're asking should we be trend followers or contrarians, I'm all for being a trend follower 100% of the time all the time.

    But sometimes the trend gets so stupid you have to revert back to your original state of being an outcast and become a contrarian.

    Like I said, I guess it depends on if you "fit in."

    Am I "cut out for it"? I don't know , I don't seem to be cut out for anything else.
  5. millions - 'do you want milk in your coffee ?' etc, etc, etc
    all individual decisions are binary - yes or no

    the difference with trading is it's about money, win money lose money
    the closest emotional/psychology I know of is 'buyer's remorse', having bought something
    the buyer now doubts they should have bought it
    a lot of buying/shopping is based on 'return', the buyer's able to return what they've
    bought unconditionally, and so has confidence in their buying/shopping decisions

    the trader doesn't have an unconditional 'return trade' policy so there's always a much
    larger emphasis on lose, much greater buyer remorse syndrome accompanying each new
    trade, so the first question becomes, 'should I enter the trade ?'
  6. Not exactly. Milk yes or No. But it does not affect result 100% as you to throw it away or drink. You might still drink a little coffee without milk.

    My guess is, we as species are not cut out for such task to do it on our own using our eyes,ears and brain(affected by cognitive biased). May be computers can do it better.
    no matter how much psychological training we attempt, the basic object (our body) is still not made for it.

    i am not a psychologist, and i could be wrong.
  7. I agree with the uniqueness of the independence of trading, that is true. I'd bet that a lot of traders tend to have more independent personalities as well, which draw them to things like trading. But I don't agree with the idea that trading decisions can be so easily identified as right or wrong.

    You're making the assuption that determining the outcome of trading decisions is as easy as win or lose, profit or loss. That misconception is one of the main reasons that ventures like trading are so hard for people to learn. We expect to have direct feedback from our actions to let us know if we were right or wrong. But trading results are decieving. Like Oldtime said, what makes your decision right or wrong is not profit or loss. It takes an analysis risk vs reward and the probablity of success. I think this is what makes trading decisions so different from all of the other decisions we make in life.
  8. Eight


    Cueing a pool ball. It's either in the pocket or not. Lots of traders say they operate on gut feel and cuing a pool ball is very muchly done with gut feel, not that there isn't a certain amount of intellectual work and practice to be done to become good at it, similar to trading. The experts have told me that if a shot doesn't feel good don't cue it.. if the trade feelings come from fear or greed, they are false and have to be avoided, in pool if the shooter is fearful of missing or scratching then he won't play very well...
  9. have you been born yet?usually,meditation helps.try to meditate,from there,you`ll, hopefully, start getting a better understanding of what is all around.

    p.s. the result is always binary and always 100%,but could be a slightly shifted in your favour.
  10. All this psychology things we talk about is good, but at the end does it really makes difference? I am not talking about Soros and Buffett. They have something that can not be trained in to average Trader.

    All that i am saying is, we as species are no different than any other species.
    look at time scale. from single cell life to what we are today, it took millions of years. On that scale this psychology and economics crap is for last 200 years or less. But our bodies inbuilt code (which is very similar to any other life), is still very much same. Survival and procreate (to survive our species) that's all.
    so no matter how much we train and teach psychology our self, the body and it's resources which are influenced by cognitive bias, stays intact.

    At the time of crunch, we fall back on the same inherent code that we are carrying for millions of years. Psychology goes out of window.

    Knowing is highly overrated. You can know fire, but it can still burn you.

    On that background I think, fully automated trading and eliminating human completely from day to day trading decision is better than spending time and money on psychology.
    #10     Aug 1, 2011