The Roman philosopher Seneca wasn’t talking about the stock market when he wrote that “T...
The Challenge of Mixed Information
07/13/2015 6:00 am EST
As a trader, dealing with mixed messages—from both the markets and the commentary of media pundits—can often seem more challenging than trading itself, so Andrew Menaker, PhD, of AndrewMenaker.com, highlights how to better cope with this ambiguity through self-awareness, honesty, and courage.
One of the greatest challenges in trading is dealing with ambiguous information. The market is always sending mixed information to various degrees.
We can also see this ambiguity in the commentary from the market pundits in the media. Each pundit chooses (consciously and/or subconsciously) to focus or emphasize one thing over another thing.
I came across the following quote recently:
"The most difficult task that falls to us in intelligence is to see the world as it is, not as we—or others—would wish it to be." -Robert Gates, addressing a group at the CIA in 1991
I talk about this all the time, using different words:
We don’t see the market as it is; we see it as we are. What do I mean by that?
Our thoughts, feelings, hopes, expectations, and beliefs (both conscious and subconscious) create a personal filter that we see the market through. And that filter forms the basis for our entry and exit decisions.
That’s just the way it is. It’s part of being human. And this filter not only impacts how you see the market, even your choice of instrument, time frame, trading style, etc, are influenced.
Traders who are self-aware, who understand their own biases, their fears and hopes, and what triggers them are in a better position to profit from the market. Going one step further, traders who are self-aware and who are honest with themselves are in an even better position. And taking another step, traders who are self-aware, honest, and have the courage and willingness to do the work to incorporate their own personal trading psychology into their plan are in the best position.
What kind of trader are you?
By Andrew Menaker, PhD, AndrewMenaker.com
Related Articles on STRATEGIES
The Dow Theory was originally referred to as “Dow’s Theory,” since it was based on...
When stocks are selling at valuation extremes and consumer optimism is at one of the highest levels ...
The stock market is still bullish but it’s flashing yellow caution signals that are even brigh...