Oct

12

In the film "My Cousin Vinny", after displaying his wholly unexpected talent for eviscerating the testimony from each of the prosecutions witnesses, Vinny remarks "I'm done with this guy".  

Being "done" with a trade should not be confused with being done with a particular security. I find, however, that in my own trading when I finish a trade and move on, I have a tendency to wholly disregard the vehicle I was just trading and go looking for other fish to fry. This, of course, tends to be a mistake. I'm not sure what biases are at play here, it seems like some sort of completion bias. (The closest thing I could find to it is the Zeigarnik effect which states that people remember uncompleted or interrupted tasks better than completed tasks).

I find this phenomenon occurs in my trading regardless of whether my last trade was a winner or not.


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3 Comments so far

  1. david higgs on October 12, 2009 5:30 pm

    What comes to my mind is, " buy low sell high" over and over again, at least that's what the guy in that commerical says to do. Can't recall which outfit he was touting, maybe you do?!?

  2. Abhishek Negi on October 13, 2009 4:51 am

    Just wondering if the Nobel prize awarded this year is in line with the Zeigarnik's theory of incomplete works and the hope of completion.

  3. Steve Leslie on October 13, 2009 8:23 am

    We are our worst enemy when it comes to trading. I liken it to standing up at the first tee at your country club and having the starter, and two foursomes in addition to your own watching you hit your first shot of the day. Some guys can handle it and some cant. Some stripe their drive 280 down the middle of the fairway, some guys end up knocking it into the woods or into the water or dribbling it down the fairway.

    Look at it this way. I buy GS in March at 45 sell it at 120 I made one hell of a trade. I am a hero I beat the system. I am king of the castle. Master of the Domain. Now what if I go back to GS at 130 Several psychological "Bells" go off.

    One could be "Why did I sell at 120 I could have kept it now it is at 130. I am paying 10 more for a stock I just sold."

    Or

    "If i buy at 130 and it goes down to 120, I just paid 10 more for something that I just sold at 120. Now instead of making 75 I made 65."

    or

    "I just sold GS at 120 and the committee will now want to know why I paid 10 more for something that I just sold."

    Or……… you complete the sentence.

    It is the inner dialogue that destroys logical thought. The battle for Investment Survival to steal a title from Gerald Loeb is in the mind it is always in the mind.

    To use poetic license with a Vince Lombardi quote "The Good Lord provided you with great talents and skills, it is your mind you have to convince."

    Steve McQueen said in The Sand Pebbles "Well shoot something."

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