Trading psychology

Analysis can be taught in weeks. Self-control is the real work, and it never ends. Most people who know what should be done do not do it — and the gap between knowledge and execution is the whole matter.

The biases working against you

• Loss aversion — the pain of losing 100 dollars is sharper than the pleasure of making it. So you close winners quickly for fear of losing them, and hold losers hoping they return. This is exactly backwards.
• Confirmation bias — once the trade is open, your mind hunts for what confirms you and ignores what contradicts you.
• The sunk-cost fallacy — “I have lost so much on this trade, I cannot close it now.”
• Overconfidence — after a winning streak, sizes grow and rules get ignored. The most dangerous moment for your account is right after your best week.
• Fear of missing out — entering late in a strong move, usually at its end.