How you really make decisions
Just caught this really interesting Horizon programme on BBC iplayer. It confirmed my thoughts on 'gut feelings' and offered interesting insights on what guides our decision-making processes - the conflict between intuition (System 1) and logic (System 2). It looked at some of the biases that we are all subject to (I think I've just demonstrated 'confirmation bias'!) It showed that the tendency to take risks in a loss-making situation may well be embedded in our DNA. I suspect however that successful traders may have already recognised these traits in themselves and have developed sufficient discipline and appropriate strategies to overcome them.
Just watched it. Very good programme.
I really wish that when I started trading someone had said to me "your natural inability to accept a lose will cause you the biggest problems". That would have saved me a lot of time and money. Except they probably did and my system one ignored them.
I really wish that when I started trading someone had said to me "your natural inability to accept a lose will cause you the biggest problems". That would have saved me a lot of time and money. Except they probably did and my system one ignored them.
That list was really facinating, thanks for posting 
I'm finding it hard to imagine many of them now though, during trading time my brain is so focused on the kind of tasks it has to do that it finds it hard to process conceptual stuff like that
Anyone else have that kind of 'problem' or is it just me?
I'm finding it hard to imagine many of them now though, during trading time my brain is so focused on the kind of tasks it has to do that it finds it hard to process conceptual stuff like that
Anyone else have that kind of 'problem' or is it just me?
The programme demonstrated how it was more difficult to perform an act requiring conscious thought (eg repeated subtraction), whilst at the same time performing an automatic task (eg walking quickly). So yes, a successful trader needs to be totally focused and free from distractions (statement of the bleedin' obvious?).
Nice summary of some elements of Human Psychology and risk
http://www.youtube.com/watch?v=w-CK8VxMz9g
http://www.youtube.com/watch?v=w-CK8VxMz9g