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Edward J. Webb

What is the Most Common Investors Mistake?

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"What is the Most Common Investors Mistake?

smart ast answer = not knowing the difference between trading and investing.

 

 

 

 

 

 

 

 

 

"What is the Most Common Investors Mistake?"

 

sincere ast answer ( in a traders lab btw ) =

 

the setups / your setups go something like...

http://www.advisorperspectives.com/articles/2015/03/17/bounded-rationality-unbounded-confidence

 

 

the react / your react leads to

the BIGGEST MISTRAKE which = holding large losses!

After all that crap in the setup above gets you into jangled – the brain becomes more risk seeking with losses than it is with gains.

Without intervention, you will tend to liquidate your winners and hold your losers.

 

That loss you’re holding or that loss you are at risk of slipping into any day now – The market may never go back to breakeven for you in the rest of your trading career!

I know from shorting big contracts in the 80’s in 'down trends'.

You may think you are protected by a trading system – you’re not!

Let advice about holding large losses sink in. ie

‘Learn from the mistakes of others – life’s to short to learn them all by yourself’

Have a personal plan in place that handles all the contingencies.

 

Again - in psychobabble - it goes like this ... At some point in the setup above you pass a threshold and without intervention, you will tend to liquidate your winners and hold your losers... your brains become more risk seeking with losses than they are with gains.

 

 

A position in the red is not a danger signal.

Doubt is not a danger signal.

But -

A position in the red + hope + pain is an extreme danger signal of imminent and

lasting financial, mental, and emotional damage – regardless of the position’s outcome.

Learn from others' experiences – at the first tinge of hope or wishing, set a point and if it goes there, get out.

Your system should be robust enough to get you back in if the market comes roaring

back your way. And if the market doesn’t go to that drop dead point and it comes roaring back your way, don’t let that teach you the wrong lesson.

 

For someone out there, this thread was no accident.

We don’t know who you are but you will know who you are…

 

Humbly,

 

zdo

 

PS : You are correct! There is no good place for a stop in your system.

However, even though there is never a good spot to place a stop - there is still always a good spot to take a loss!

Edited by zdo

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btw to help you decide whether to give any credence to what I’m saying

1) I do not agree with the proposed “two possible solutions to the problem of limited rationality” in the 'bounded unbounded' article.

 

2) I don’t think you have to study the market to see how it works.

You already know. But- you may need to clear blocked flow to get at it.

 

3) I don’t think you have to develop a trading plan / style.

I think you already have one built in ... you just need to remove blocked flow in the body/brains to get at it.

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I'm a novice investor and I would like to know your opinion or maybe some experience.:)

 

Edward... most of the answers you will get from such a question about "investing" will come from "traders" not "investors".

 

I allow a paid professional to deal with the big money; the small money, money used to generate income, I deal with. So, if I'm doing my job, the small money (after expenses, and charitable contributions) becomes big money which is invested.

 

That's my small brained explanation of how I invest. You don't have to have a big brain to trade (regardless of what you may hear from traders). Ha!... you just need to have "flow". I understand zdo, but it makes me laugh every time. It's good to employ the use of big brained people when investing... I'm not big brained.

 

Edit, note to zdo: It may just be my idiot trader brain that takes me there, but I'm reminded of the movie "Dr. Strangelove" and "precious bodily fluids". I realize that's not a good correlation, but it amuses me none the less...

Edited by jpennybags

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... note to zdo: It may just be my idiot trader brain that takes me there, but I'm reminded of the movie "Dr. Strangelove" and "precious bodily fluids". I realize that's not a good correlation, but it amuses me none the less...

 

Sounds like a fun association - but I only saw a few minutes of that film ...decades ago. You'd have to fill us in a little bit more Thx

 

zdo

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Sounds like a fun association - but I only saw a few minutes of that film ...decades ago. You'd have to fill us in a little bit more Thx

 

zdo

 

It always amuses me when you start talking about "flow" to noobs. I'm sure it leaves them shaking their heads... "that sh*t is crazy talk".

 

From the movie, Gen. Jack Ripper expounds on his (insane) theory of "precious bodily fluids"... it's mentioned several times. His theory wraps up communism, fluoridation, and orgasm into a neat package (at least for him). I think the reason that I made the leap, is the correlation of the words "flow" and "fluid". Also, the above mentioned "crazy talk". That's my best guess as to why I went there. It's in my recollection now... go there every time... can't help it.

 

I get "flow... I get you. I'm not sure everyone else does...

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Blindly investing in a company simply because they worked with the executive staff before and naturally think that they will be successful again. The opposite is also true, ignoring a potential company because the executive team is a relatively unknown group of people and that they can't possibly succeed because they don't have a track record.

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