Category: Psychology
Why does a strategy fail the moment you use it?
You know the feeling, you work hard to research and establish a new idea or strategy. You put it to use and it works, so you raise your stakes and booooooooom, it instantly reverses and losses you a shed load of money. It can sometimes feel like the market has got it in for you or like somebody is watching you.
You don’t deploy a strategy to lose money
When you set out to deploy a strategy you don’t expect …
Why we choke and how you can profit from it
I’ve just finished reading a very good summary of the core reasons why we choke. The article is a nice clean summary and is worth a read.
Basically it comments on how information is stored in the brain and transferred from a semi autonomous region to a more thoughtful process. The semi autonomous region falls apart when it is forced to transfer back to the other part of brain. Your brain can be in the zone, then forced out of …
Seasonality in Horse Racing
Still, plenty of racing to look forward to and the champions meeting still to come followed by the restart of Cheltenham, but what happens as we move into the winter?
There are plenty of highlights around at this time and more as we head into the full on jumps season. For some reason, I know it’s named after a horse, the Tingle Creek meeting at Sandown sounds Christmassy to me, but for sure is an early high point in December. …
Two books that will change the way you think
In my quest for unreachable perfection, I’ve spent a lot of time trying to understand how people think. There are several reasons for doing this.
The first is to make better decisions myself, sometimes people make decisions or say things that just don’t make any sense. You often also get stuck making a decision which you can’t seem to resolve.
Having thoroughly explored the markets, what to do, when and how (so far) in my career I’ve switched my main …
A classic psychological flaw
Here is something that will help you understand the way people act and what you can’t do about it! But how you can benefit from it.
I made a comment on Twitter a little while ago saying something along the lines of “if I ever think going to lose my edge all I need to do is look at social media and I know that’s not going to happen”
Entrenched views
What I was commenting on was the proliferation of …
Apophenia
Apophenia is defined as, the “unmotivated seeing of connections” accompanied by a “specific experience of an abnormal meaningfulness”. For the full definition visit the wiki entry: –
https://en.wikipedia.org/wiki/Apophenia
Apophenia has come to imply a universal human tendency to seek patterns in random information, such as gambling or charts. It’s a flaw that afflicts many.
Apophenia and Gambling
Probably the best known appearance of this in gambling markets is the gamblers fallacy. This is when a long run of results lead …
Kaizen
Nobody is perfect
You know what, nobody is perfect. We all get emotional, we all defend our views and our patch of turf vigorous and sometimes errantly. But when I started 20 years ago I wanted to achieve something really special. So each morning I wake up, that’s my objective. I think about what I can do today to nudge my activity to a new level. I think hard about what I, not others, are doing and how I can …
How extrapolation trips people up when trading
A trend is your friend, until the end.
One of the most common mistakes I see in newbies is trend following. Trend following is when you latch on to a pattern and extrapolate it. It could be a horse that is heavily drifting or coming in, perhaps a football team on a great run or form, or a poor one. Perhaps a team has had 20 games under 2.5 goals. Is there a trend, why, or this a natural aberration?…
Winning and ‘luck’
Once you get the winning mentality, it enters your bloodstream and doesn’t leave. But winning and luck isn’t random or down to chance, it is an art that is learned through endless painting of poor pictures, then through rubbing out mistakes and constant revision and practice. A winning mentality and ‘luck’ can be learnt…
This weekend I was invited to a charity ball. People like inviting me because I bid on things!
At the end of the evening I was …
How you really make (trading) decision
If you haven’t seen this episode of Horizon it is worth a watch: –
It is titled, ‘How you really make decisions’
https://www.bbc.co.uk/iplayer/episode/b03wyr3c/Horizon_20132014_How_You_Really_Make_Decisions/
I’ve used some of the examples in this episode in my courses from time to time.
I became interested in sub-optimal behaviour when I started working out how to win the football pools. I figured that while there was an inbuilt edge against me in he market, most people wouldn’t use optimal behaviour to place their bets …
Stop losses and the illusion of safety
Drachten is a small town in Holland, but what’s got to do with stop losses & risk?
Well, a few years ago almost all traffic lights and signs were removed from the town’s centre in an effort to improve traffic safety. This was based on the theory that drivers pay more attention to their surroundings when they cannot rely on strict traffic rules. What happened was that accidents fell because people actually paid attention to actual risk, rather than relying …
The missing link in trading
I’ve been on a very long journey to understand risk and trading as I do now. When I talk and examine risk I do so almost intuitively now, but I had to learn it all the hard way, from the ground up.
The journey has led me to re-examine myself a lot. I’ve had to learn and improve my ability in three distinct things, trading (the structural bit), modelling markets (the understanding bit) and finally a bit of psychology (the …
Serving your trading apprenticeship
I’ve often advocated a number of different things on this blog relating to how you should approach your time in the markets. The reason, I’ve been through it all!
I’ve posted a link on the forum to some stuff I read recently that I think will be of interest to readers of the blog.
It’s talking about an ‘apprenticeship’, what does it take to get to establish yourself in a role and master it and I think it’s equally applicable …
Inspiration overload!
The motto for the Olympics this year is ‘inspire a generation’. I think they are delivering in the UK, can’t comment on the view from the outside in.
Inspiration in an important word. Inspiration shows the way, leads people and asks them to step forward and take things to a new level, inspiration is good.
Seeing somebody successful should inspire you, not make you jealous. That first emotion is a strength, the second a weakness; you can little from it. …
The science of choking
With England due into action today I thought this may be an appropriate topic.
I will be watching the England match with great interest. Primarly to see how the England players settle in against the French. Will the weight of expectation weigh on their shoulders, or will the lack of expectation relax them and allow them to perform to their full ability? If the latter happens then that could be quite interesting with England trading at larger odds than normal. …
A tale of last day relegation
Last day of the premiership today, hoping for a few twists and turns on the last day.
I recently watched Southampton get promoted to the Premiership. It’s the end of a seven year wait and has finally exorcised the ghost of relegation from seven years ago. But for me it also has been a point of closure after I sent my team down seven years ago! Well I say I sent my team down, I didn’t, but it felt like …
Cardiff fans turn red over blue
Continuing the blue theme from yesterday. Cardiff fans up in arms as the bluebirds look like they will be forced to change colour. Full story: –
However, the owner may have a point. I pointed out some scientific research on a previous blog post. One element of this was looking at the effect of red and blue and how it affects sports performance or the interpretations of officials in sports tournaments. The results were fascinating.
See the original blog …
Craving more Craven
Stuck in a pretty good performance on the first day of the Craven meeting and was pretty pleased all round with overall performance. Some of the testing I’ve been doing on new ideas came good as well, so I’m really chuffed. The champions league didn’t really through off a quality opportunity last night, but apart from some stuff before the off I didn’t really get that involved. Second legs should be interesting.
I prefer to know whether I’m in a …
Nuts, lightly roasted
I’ve been experimenting with a new strategy recently. I’ve learnt from past experience that data mining can be statistical deja vu. So whenever I make the transition from theory to practical, it always pays to be cautious. So on this occasion I have hedged my position on separate accounts to understand how the main strategy performs but without putting myself at too much risk.
Immediately the strategy started working, with a couple of glitches, so the main account started to …
Why a lack of fuel is linked to sports trading
On the walk into the office this morning I passed the local petrol station, there were a queue right out into the road. I saw somebody I knew who had driven in from some distance and he revealed a similar story across a wide area. It’s all down the fuss about whether tanker drivers will go on strike. People are scared that fuel may run out if this happens. You can summarise this situation up quite simply, people are acting …
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 …
Performance anxiety – Why players lose form
Lovely piece on psychology in the weekend FT. It examines why players of a sport often inexplicably lose their form. I’ve been studying this specifically in a few sports to come up with predictors of decline. My research was sparked by the collapse in form David Duval after he won the British Open golf and I started to dig around deeper and deeper for events that can lead to a decline. I’ve found it useful in Golf and Tennis which …
On average.. The essense of value
Let’s start by proposing something simple. If you back or lay something it’s impossible to be right 100% of the time. I think most people will realise that it’s impossible to win every bet you ever placed. Therefore you have to accept that you will place losing bets. If you place losing bets you need your winning bets to cover your losses, that’s the only way to make money in the long term.
To get your an overall profit you …
How to win at rock, paper, scissors
I posted this on the forum some time ago.
It’s actually a good analogy for the sort of though process you need to go through when trying to out-think others and one that I think is equally applicable in any market. Sometimes people don’t choose the most logical progression in a sequence of events. Even then is seems that people peoples decisions are often forced by an ‘invisible hand’. Anyhow, an interesting article I think: –
https://games.yahoo.com/blogs/plugged-in/win-rock-paper-scissors-215511514.html
…
iCons
As you may be aware now Steve Jobs passed away last night.
Whether you agree with everything that key figures have to say or what they do, or whether you feel they were lucky, or not. One thing you should do with people who have trodden a useful path before you, is to learn from them.
Throughout my life I have actively sought to try and work with, meet and learn from people better than me. It’s easy to find …
Bounce
As this post got buried on the blog the last time I posted it, I have reposted.
I’ve been reading this book recently and it resonates with me. Of all the things I have done in life I have maintained most wasn’t talent, just hard work and lots of practice; but maybe that is how you acquire talent? I’m learning to play the piano at the moment. I’m rubbish, but getting more ‘talented’ everyday.
If your desire is strong …
Bad Luck
I talked last week about my jinx and you witnessed my efforts to demolish it. You should never forget to put things into perspective. My battle was a personal one against an arbitrary target. Some people face much worse luck and much bigger battles. It’s a credit to them that they persevere in spite of much hardship.
So the next time you feel unlucky, or you have lost a few quid, take a read of the following: –
Jinx week
For some reason this week each year is the week where errors creep in, unexpected things happen and bad luck gets called in. I’ve netted some of my most spectacular failure in week 20 for some reason, year after year. I can’t explain why and despite attempts in previous years to be super cautious during this week, something always trips me up. It could be anything, a system crash, broadband failure, Betfair crash, highly unusual event, anything.
So you can …
There was a little girl
You may have heard this poem before: –
There was a little girl,
Who had a little curl,
Right in the middle of her forehead.
When she was good,
She was very good indeed,
But when she was bad she was horrid.
The market can feel like that at times and it can be the very thing that throws you off balance. But you have to believe that just as the market can be horrid she can be very good …
Cock ups, blunders & mishaps
You are either perfect or a liar and nobody is perfect.
Coming to terms with errors is the key to success in anything. If you stop or get put off by losses, errors or mishaps, you will never see the upside. Upside is always there, but a lot of people never ‘see’ it. Couple losses, cock ups, blunders & mishaps with a bit of psychology and it prevents you from getting to the good bits. It took some time, but …
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