Oct

31

 One often reads that many successful investors are often "too early"; buying and selling too soon. Certainly looking at screens frequently (or never not looking at them) is an impetus for action, even if waiting would have been better.

It should be possible to check your timing by going back and moving the timing of your trades forward and backward to see if P/L would have been different, and a consistent lag or lead found. The amount of shift would correspond to the timescale of the trade, possibly some fraction of the holding period.

Of course identifying such a trend would be easier than correcting it. For example if you are on average 15% early, you could decide to purposely delay entry or exit by this amount of time. But this thought could Heisenberg you, and change the way you identify timing signals.

Alternatively there may be a psychological element at play. Given that the pain of losses are about 2.5X higher than the pleasure of gain, and that most trades entail some pain, it is possible we mistakenly emphasize the memory of this pain and heuristically conclude "too early". The memories of missing the pain of early trades outweigh memories of early profits. Most likely the distribution of early/late is random for most traders.

Relatedly, some men have other problems with prematurity; one treatment for which is SSRI antidepressant therapy. Another way to study early birds would be to separately analyze traders who take SSRI's vs those who do not, and look for a difference in timing skill.

Speaking of elections, conspiracy advocates wonder whether there is anything funny about the timing of the Yemen packages. The next Michael Moore show?


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