Sabtu, 01 Juni 2013

Boris's Weekly Email - Rationalize This!

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Boris And David Trade Live

Please Join Us For A
Free Webinar on Live Trading 
On June 4th at 1700GMT (1300EST) David Aranzabal and I will host a Free Webinar to discuss our upcoming Live Trading Event in Madrid on June 18th.  This Live Trading event will be simulcast on the Internet, so you will NOT  need to be in Madrid in order to enjoy the presentation. 


That's why I would love for you attend our free Webinar to hear  about our latest day trading that we will employ live with real money in Madrid on June 18th.


Register for the webinar here  and even if you can't attend - don't worry we'll record it and send you the on-demand link when its done.

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Thoughts on Trading 
Rationalize This!


One of the best articles I've seen this week comes from Motley Fool. It's called Why You Never Learn From Your Investment Mistakes and I going to quote from it liberally because I think its one of the most important issues for us as traders to understand. 








"You are a monkey. It all comes down to that. You are a slightly clever, pants-wearing primate. If you forget that you're nothing more than a monkey who has been fashioned by eons on the plains, being chased by tigers, you shouldn't invest. You have to be aware of how your own psychology affects what you do.

Take one of the most powerful theories in behavior psychology: cognitive dissonance. It's the term psychologists use for the uncomfortable feeling you get when having two conflicting thoughts at the same time. "Smoking is bad for me. I'm going to go smoke." That's cognitive dissonance.

We hate cognitive dissonance, and jump through hoops to reduce it. The easiest way to reduce it is to engage in mental gymnastics that justifies behavior we know is wrong. "I had a stressful day and I deserve a cigarette." Now you can smoke guilt-free. Problem solved.

Humans are one of the only creatures that engage in this self-deluding behavior. In their excellent book Mistakes Were Made (But Not By Me), Carol Tavris and Elliot Aronson write:

A dog may appear contrite for having been caught peeing on the carpet, but she will not try to think up justifications for her misbehavior. Humans think; and because we think, dissonance theory demonstrated that our behavior transcends the effects of rewards and punishment and often contradicts them."

One of my favorite movie lines of all time comes from Big Chill. Jeff Golblum and Kevin Kline as peeing in a Michigan forest and Goldblum says, "Don't knock rationalization. Where would we be without it? I don't know anyone who'd get through the day without two or three juicy rationalizations. They're more important than sex. Have you ever gone a week without a rationalization?"

Traders are some of the most prolific rationalizers I know. In a world where so much of what happens to you is outside of your control, the urge to rationalize your actions is especially strong. But the Motley Fool article goes on to say that successful traders don't rationalize They analyze what they did wrong and try to correct it. Yet this can also be a terrible trap. Sometimes you did nothing wrong. Just because three trades in a row missed your target by a pip, does not necessarily mean that you must change your strategy. One of the of the hardest things to do in trading is to budget for losses. because we simply can't accept losing and will try to do anything in our power to rationalize it away even it means quitting on what may ultimately prove to be a winning strategy.




















BKForex Trading Video -
  USD/JPY 100.00 Hold or Fail? Weekly Forex Tech 6.03-07.13
USD/JPY 100.00 Hold or Fail? Weekly Forex Tech 6.03-07.13
USD/JPY 100.00 Hold or Fail? Weekly Forex Tech 6.03-07.13

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Boris Schlossberg and Kathy Lien

Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.


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