How to Find Your Trading Biases

One of the exercises I've found most helpful for traders and portfolio managers is a thorough review of trading performance. Many times, the ups and downs of profit/loss reveal biases and patterns in our trading. Some of the patterns worth looking for include:

* How you trade after you've made money versus after you've lost money: Do you trade more? Larger? Do you trade differently based on recent P/L? Do you become risk averse after recent losses? Does that affect your future P/L?

* How do you trade when you're taking more risk versus less risk? Does different size/risk exposure cause you to trade differently? Are you actually making more money when you're taking more risk?

* What kinds of markets and market patterns provide you with your greatest profits? Losses? Do you trade selectively to maximize your best opportunities? Do you overtrade markets that are not ones providing you with opportunities?

* What is your ratio of winning to losing trades? What is the ratio of the size of average winners to the size of average losers? How successful have you been in finding large winners? In preventing large losers?

Many times, our greatest biases and psychological mistakes come through when we thoroughly review performance. The decision to not review performance is perhaps traders' greatest bias blind spot.

Further Reading: Training Yourself in Pattern Recognition
.

Comments

Women and children overboard

It's the Catch-22 of clinical trials: to protect pregnant women and children from the risks of untested drugs....we don't test drugs adequately for them. In the last few decades , we've been more concerned about the harms of research than of inadequately tested treatments for everyone, in fact. But for "vulnerable populations," like pregnant women and children, the default was to exclude them. And just in case any women might be, or might become, pregnant, it was often easier just to exclude us all from trials. It got so bad, that by the late 1990s, the FDA realized regulations and more for pregnant women - and women generally - had to change. The NIH (National Institutes of Health) took action too. And so few drugs had enough safety and efficacy information for children that, even in official circles, children were being called "therapeutic orphans." Action began on that, too. There is still a long way to go. But this month there was a sign that ...

Benefits Of Healthy eating Turmeric every day for the body

One teaspoon of turmeric a day to prevent inflammation, accumulation of toxins, pain, and the outbreak of cancer. Yes, turmeric has been known since 2.5 centuries ago in India, as a plant anti-inflammatory / inflammatory, anti-bacterial, and also have a good detox properties, now proven to prevent Alzheimer's disease and cancer. Turmeric prevents inflammation: For people who

Austerity-A Fancy Word for Destitute.

The reason for this post is not for the folks who have been caught in the first wave of personal economic hard reality, but the next wave. Regardless of the optimism espoused by grinning leaders and sycophant press, we are entering the final stage of global economic collapse. It began in 2008 and was forestalled for five years with fudge putty, but the weight of global indebtedness cannot be propped any longer and the final crunch is imminent. Austerity measures herald the final throes. Indications of coming austerity. Austerity measures are the final last ditch effort, futile or not! Back in the day many of us old-timers went through periods of "hard-times". In retrospect I realize there is no comparison to yesteryear hard times and today's version. Back then, expectations were never very high for the working class, there were no sophisticated systems or conveniences anyway. In fact the difference between being "set" or not was about having treats or not. Si...

Humor4u

Search This Blog