I know I have lot of biases about trading– that day trading is a losing proposition, that I get sucked into the bear camp… Early on my bias was to think the markets were totally rigged and also fully predictable.

It all leads me to the notion that our biases are what prevent us from prospering to our peak potentials.

Anyone else have thoughts about this?

Jeff Watson writes: 

I see biases from many of my friends that are permabears who make Abelson look like a bull. They just don't understand that as long as the conditions that allow stocks to carry themselves don't change, the stock market shouldn't suffer greatly. I would assume that the permabears are losing money but according to most of them they are making money. The Chair indicated that on Tuesday, to put words in his mouth, the market told us that seppuku was an option, then the stocks rallied and are 4% higher than Tuesday. It's amazing what can happen in 3 days. My bias is that being bearish in a bull market is just as fruitless as rowing the Bay of Fundy when the tide is coming in. Never fight the tides, the headwinds, the hidden powerful forces that control things.

Paolo Pezzutti writes: 

The bias is not in understanding the market's rhythm and extensions. The bias is fighting one's fear in order to balance risk and reward. The bias is the ability to trade bigger sizes when the opportunity is there and keep the trade open much longer to get a full profit. As one tends to scalp markets for small wins…. the bias is recognizing that you cannot win if you are not ready to lose.

Hernan Avella writes: 

The biases people have mentioned the most are: daytrading/scalping and not letting winners ride. I have two observations:

1. The real bias of daytrading/scalping is overestimating one's ability to compete in the most difficult arena of trading. It's is the most difficult because is the most profitable if you are a winner, the shorter your timeframe the more deterministic your process is, hence it attracts the most capable people in the world.

2. 'Not letting winners ride' - People have a bias to remember what they missed. They don't remember the 900 point draw-down they saved by puking when they did. After watching the market go from 665 to 2075, most peoples definitions of biases are towards holding their buys. After the market went from 1586 to 665, most peoples definitions of biases were about flexibility and cutting losers.

In sum we are biased about our biases.

Gary Rogan writes: 

"the shorter your time frame, the more deterministic your process is"

Came across a quote yesterday with a different perspective. Investor Ralph Wagoner once explained how markets work, recalled by Bill Bernstein:

"He likens the market to an excitable dog on a very long leash in New York City, darting randomly in every direction. The dog's owner is walking from Columbus Circle, through Central Park, to the Metropolitan Museum. At any one moment, there is no predicting which way the pooch will lurch. But in the long run, you know he's heading northeast at an average speed of three miles per hour. What is astonishing is that almost all of the market players, big and small, seem to have their eye on the dog, and not the owner."

Stefan Martinek writes: 

Maybe our biases can be traced back to our good/bad memorable trades (long vs. short price, long vs. short tail, futures vs. stocks, slow vs. fast, systematic vs. discretionary, science vs. some market religion, etc.). Non-trading related education can create massive distortions about what is good and bad as well.

Henry Saad writes:

Overspecialization in the tape. Watching every single tick has been detrimental to my personal trading. Removing myself ever so slightly improved my results. Been watching the dog on the leash for so long haven't even noticed the owner.





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