Is inability to trade a genetic trait?
When you look at any market that follows a random walk, upside and downside is created in equal proportion. So it’s impossible, if you participate at random, to lose money, apart from the cost of transacting in that market.
On the stock market it’s even more favourable as the underlying investment is net accretive, so it should be even less possible to lose money. But still people lose!
Having studied the markets for so long I now have a very deep understanding of what happens, why and how. So in the second half of last year I switched my attention to why people are so good at losing money when they really shouldn’t. I think I’ve uncovered a couple of key characteristics as to why this happens, so I am now working on how I can correct these behaviours. I have to admit to be a ‘mindset’ sceptic. I’ve always felt that if you can not explain why you are doing something successfully then you will ultimately fail in the long term. No ‘feel’ or ‘mindset’ will stop you from losing if your underlying activity is flawed or fails if something changes. So I’ve always focused on the why, why and the why! That’s one of the things that explains long term success IMHO, a restless need to know.
While browsing the WSJ this morning I spotted an article that suggest I may face a stiffer task than I expected in getting people to change their approach. I’m always a little sceptical of these newsbites, but it was interesting reading anyhow.
https://blogs.wsj.com/totalreturn/2012/02/22/when-your-dna-dings-your-roi/?mod=e2tw
Category: General, Psychology
