Welcome to the Behavioral Trader blog. I’m an individual investor who trades fairly frequently (about 200 trades/year) and I’m using this blog to keep a record of my trading behavior. The goal is to help me and my readers improve their trading behavior.
What’s an example of trading behavior in need of improvement? There are times when I think I should sell a stock, but don’t because I had hoped it would reach some targeted return. While I think its good to have targets, targets should be predicated on assumptions. And when the world says your assumptions are wrong, targets should be re-examined. There are also targets based not the stock itself, but on what I call wealth fantasies. For instance, you target being worth $X in Y years so you want to hold stock Z until in hits price $P (stock Z is probably a stock to which you have a strong emotional attachment) . Positions which you’ve assigned this type of target to can be very difficult to part with, even when the roof is caving in. This can cost you alot of money.
I will also track other factors which I think may influence me, such as whether I’m feeling stress in other parts of my life or what I have read recently. Maybe when I haven’t had much sleep, my trading judgment suffers. Maybe when I’m busy with other things I can’t concentrate on trading, or maybe outside activity helps me have flashes of insight. Or maybe these things have no effect at all.
Some might argue that you can’t beat the market and I should just put my money in an index fund. Well, maybe so, but I’ve done pretty well over the past few years, and while I’m far from ready to declare myself an expert investor, I think there may be a positive probability I can become one someday. And if at the end of the exercise it becomes apparent that the index fund approach is best, that will be valuable to know. Until that time, I will be trading so I might as well try to optimize my behavior as much as I can.
Going forward I’m thinking of a blog in two parts: a twice weekly piece where I talk about some general trading related topic, and a daily report which tracks my condition, feelings and outlook for the day. In the first piece I’ll be mentioning things I’ve noticed about myself as well as snippets from the behavioral finance literature. I don’t intend to emphasize behavioral trading strategies per se, but rather point out tendencies which researchers have noticed which us individuals may be falling prey to. In my next post I’ll discuss what I’m currently invested in and why.
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Hello World!
Welcome to the Behavioral Trader blog. I’m an individual investor who trades fairly frequently (about 200 trades/year) and I’m using this blog to keep a record of my trading behavior. The goal is to help me and my readers improve their trading behavior.
What’s an example of trading behavior in need of improvement? There are times when I think I should sell a stock, but don’t because I had hoped it would reach some targeted return. While I think its good to have targets, targets should be predicated on assumptions. And when the world says your assumptions are wrong, targets should be re-examined. There are also targets based not the stock itself, but on what I call wealth fantasies. For instance, you target being worth $X in Y years so you want to hold stock Z until in hits price $P (stock Z is probably a stock to which you have a strong emotional attachment) . Positions which you’ve assigned this type of target to can be very difficult to part with, even when the roof is caving in. This can cost you alot of money.
I will also track other factors which I think may influence me, such as whether I’m feeling stress in other parts of my life or what I have read recently. Maybe when I haven’t had much sleep, my trading judgment suffers. Maybe when I’m busy with other things I can’t concentrate on trading, or maybe outside activity helps me have flashes of insight. Or maybe these things have no effect at all.
Some might argue that you can’t beat the market and I should just put my money in an index fund. Well, maybe so, but I’ve done pretty well over the past few years, and while I’m far from ready to declare myself an expert investor, I think there may be a positive probability I can become one someday. And if at the end of the exercise it becomes apparent that the index fund approach is best, that will be valuable to know. Until that time, I will be trading so I might as well try to optimize my behavior as much as I can.
Going forward I’m thinking of a blog in two parts: a twice weekly piece where I talk about some general trading related topic, and a daily report which tracks my condition, feelings and outlook for the day. In the first piece I’ll be mentioning things I’ve noticed about myself as well as snippets from the behavioral finance literature. I don’t intend to emphasize behavioral trading strategies per se, but rather point out tendencies which researchers have noticed which us individuals may be falling prey to. In my next post I’ll discuss what I’m currently invested in and why.
Like this: