Tag: psychology

How extrapolation trips people up when trading

How extrapolation trips people up when trading

A trend is your friend, until the end.

One of the most common mistakes I see in newbies is trend following. Trend following is when you latch on to a pattern and extrapolate it. It could be a horse that is heavily drifting or coming in, perhaps a football team on a great run or form, or a poor one. Perhaps a team has had 20 games under 2.5 goals. Is there a trend, why, or this a natural aberration?…

27/10/2014 | By | Reply More
How you really make (trading) decision

How you really make (trading) decision

If you haven’t seen this episode of Horizon it is worth a watch: -

It is titled, ‘How you really make decisions’

http://www.bbc.co.uk/iplayer/episode/b03wyr3c/Horizon_20132014_How_You_Really_Make_Decisions/

I’ve used some of the examples in this episode in my courses from time to time.

I became interested in sub-optimal behaviour when I started working out how to win the football pools. I figured that while there was an inbuilt edge against me in he market, most people wouldn’t use optimal behaviour to place their bets …

28/02/2014 | By | Reply More
The missing link in trading

The missing link in trading

I’ve been on a very long journey to understand risk and trading as I do now. When I talk and examine risk I do so almost intuitively now, but I had to learn it all the hard way, from the ground up.

The journey has led me to re-examine myself a lot. I’ve had to learn and improve my ability in three distinct things, trading (the structural bit), modelling markets (the understanding bit) and finally a bit of psychology (the doing …

31/08/2013 | By | Reply More
What does value look like, on a bigger scale

What does value look like, on a bigger scale

I did a post some time ago called, ‘What value looks like’. Here is the same effect but on a much grander scale, though you should not the familiarity between the two. Finding value is one of the hardest things to do in any betting market because usually the market is hyper efficient. But probably the biggest issue is the wild swings you can get and how they affect your psychology.

In the graph you can see we start at …

26/07/2013 | By | 2 Replies More
Trading psychology in a nutshell

Trading psychology in a nutshell

Some time ago I sat two people down and gave them each a simple trading strategy. I wanted to observe first hand how people executed them.

The reason I did this, was that it had become apparent to me sometime ago, that given the same set of instructions, people often execute differently. The difference appears to be psychological.

On one desk we had one person executing fairly well and making a small profit. On the other desk we had another person who …

29/10/2012 | By | Reply More
Cardiff fans turn red over blue

Cardiff fans turn red over blue

Continuing the blue theme from yesterday. Cardiff fans up in arms as the bluebirds look like they will be forced to change colour. Full story: -

http://www.thesun.co.uk/sol/homepage/news/4305460/Blue-murder-as-Cardiff-turn-red-Cardiff-City-to-change-their-strip.html

However, the owner may have a point. I pointed out some scientific research on a previous blog post. One element of this was looking at the effect of red and blue and how it affects sports performance or the interpretations of officials in sports tournaments. The results were fascinating.

See the original blog …

10/05/2012 | By More
Why a lack of fuel is linked to sports trading

Why a lack of fuel is linked to sports trading

On the walk into the office this morning I passed the local petrol station, there were a queue right out into the road. I saw somebody I knew who had driven in from some distance and he revealed a similar story across a wide area. It’s all down the fuss about whether tanker drivers will go on strike. People are scared that fuel may run out if this happens. You can summarise this situation up quite simply, people are acting on …

29/03/2012 | By More
Is inability to trade a genetic trait?

Is inability to trade a genetic trait?

When you look at any market that follows a random walk, upside and downside is created in equal proportion. So it’s impossible, if you participate at random, to lose money, apart from the cost of transacting in that market.

On the stock market it’s even more favourable as the underlying investment is net accretive, so it should be even less possible to lose money. But still people lose!

Having studied the markets for so long I now have a very …

23/02/2012 | By More
Performance anxiety – Why players lose form

Performance anxiety – Why players lose form

Lovely piece on psychology in the weekend FT. It examines why players of a sport often inexplicably lose their form. I’ve been studying this specifically in a few sports to come up with predictors of decline. My research was sparked by the collapse in form  David Duval after he won the British Open golf and I started to dig around deeper and deeper for events that can lead to a decline. I’ve found it useful in Golf and Tennis which …

19/02/2012 | By More
How to win at rock, paper, scissors

How to win at rock, paper, scissors

I posted this on the forum some time ago.

It’s actually a good analogy for the sort of though process you need to go through when trying to out-think others and one that I think is equally applicable in any market. Sometimes people don’t choose the most logical progression in a sequence of events. Even then is seems that people peoples decisions are often forced by an ‘invisible hand’. Anyhow, an interesting article I think: -

http://games.yahoo.com/blogs/plugged-in/win-rock-paper-scissors-215511514.html

 

 

  …

25/01/2012 | By More
iCons

iCons

As you may be aware now Steve Jobs passed away last night.

Whether you agree with everything that key figures have to say or what they do, or whether you feel they were lucky, or not. One thing you should do with people who have trodden a useful path before you, is to learn from them.

Throughout my life I have actively sought to try and work with, meet and learn from people better than me. It’s easy to find …

06/10/2011 | By More
Cock ups, blunders & mishaps

Cock ups, blunders & mishaps

You are either perfect or a liar and nobody is perfect.

Coming to terms with errors is the key to success in anything. If you stop or get put off by losses, errors or mishaps,  you will never see the upside. Upside is always there, but a lot of people never ‘see’ it. Couple losses, cock ups, blunders & mishaps with a bit of psychology and it prevents you from getting to the good bits. It took some time, but …

15/11/2010 | By More
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