Although I love to test trading systems and write about new trading ideas the last couple of months I have been doing a lot of reading about Charlie Munger and his mental models. Mental models, in essence, are ideas or concepts that help us understand how the world works. Concepts such as the confirmation bias, availability […]
I don’t know why but I was lying in bed last night thinking about confirmation bias in stocks. So I thought I’d write a post about it. See, if you don’t know what confirmation bias is, you might be making all sorts of little mistakes without even knowing it.
Most commentators tell you to cut your losses short and let your winners run. This is the ‘golden rule’ of trading. If you do this, only this, and nothing else, apparently, you are bound to make money. (So long as your risk settings are also right).
Throughout the early 2000s, and not too long before the global financial crisis of 2008, UK Chancellor of the Exchequer and PM in waiting, Gordon Brown, repeatedly claimed an end to the boom-and-bust cycle. Brown was proven wrong (and catastrophically so) as financial markets descended into a spectacular downward trend. The fact is, stock market bubbles […]
I just finished reading about a study that showed many people would rather inflict pain on themselves than spend 15 minutes alone with their thoughts. It’s obviously an interesting study for a number of reasons and I think it contains some insight for traders too. Do you prefer pain over boredom? Researchers from Virginia and […]