Studies have shown that people who have a string of wins in a gambling scenario typically go onto suffer from other negative psychological biases such as the self attribution bias and the overconfidence bias. The same studies have shown that people who have a string of losses in a gambling scenario typically go on to accept lower pay-offs than they had orginally hoped for because they become risk averse.
In other words, to put it into a trading context, if you have a string of profitable trades in the market you are likely to become overconfident and we know that overconfident traders commit all sorts of negative judgements which adversely affect their portfolios. We also know that if you suffer a string of losses in the market you are likely to become risk averse which leads you to NOT let your profits run, but instead, take regular small profits which makes it very difficult to build up your trading capital over the long run.
Attached is a PDF article discussing the psychology of wins and losses.
CLICK HERE TO DOWNLOAD PDF ARTICLE
This book has been reviewed by Daryl Guppy and Alan Hull.
ABOUT THE BOOK, Daryl says:
"I think he (PAUL) has got some useful and interesting things to say. Thisisnew material and a good guide for new and existing traders."
ABOUT THE BOOK, Alan says:
"Hi Paul, just finished reading your book and I believe it to be a well written book with some very worthwhile insights - its engaging, anecdotal and reflects the fact that you are obviously well read yourself and an experienced trader/investor. I would recommend it to my students but I would place the caveat on it that it requires a degree of prerequisite knowledge and market experience."
Thanks Daryl and Alan.
In other words, to put it into a trading context, if you have a string of profitable trades in the market you are likely to become overconfident and we know that overconfident traders commit all sorts of negative judgements which adversely affect their portfolios. We also know that if you suffer a string of losses in the market you are likely to become risk averse which leads you to NOT let your profits run, but instead, take regular small profits which makes it very difficult to build up your trading capital over the long run.
Attached is a PDF article discussing the psychology of wins and losses.
CLICK HERE TO DOWNLOAD PDF ARTICLE
This book has been reviewed by Daryl Guppy and Alan Hull.
ABOUT THE BOOK, Daryl says:
"I think he (PAUL) has got some useful and interesting things to say. Thisisnew material and a good guide for new and existing traders."
ABOUT THE BOOK, Alan says:
"Hi Paul, just finished reading your book and I believe it to be a well written book with some very worthwhile insights - its engaging, anecdotal and reflects the fact that you are obviously well read yourself and an experienced trader/investor. I would recommend it to my students but I would place the caveat on it that it requires a degree of prerequisite knowledge and market experience."
Thanks Daryl and Alan.
