Beliefs and values
Beliefs and values are what motivate us and determine our decision-making processes. To the individual, they are the moral code, law if you will. That does not mean those are principle-based or in any way congruent to natural law or practically functional.
More likely, they are the cause of our pain.
Our parents often install these values and beliefs, which can be highly dysfunctional and incongruent in their applicability.
We often spoke about the fact that the market is counterintuitive, and as such, decisions made by the subconscious under stress are the worst decisions in this field. Yet be aware that it is more than just the market where we are not acting in our best interest. If beliefs and values are misaligned, we always make bad decisions from within.
Here is a list of counterintuitive behavior that can disrupt our trading and is natural to our human psyche.
Throwing good money is after bad (once we have a certain amount of time and cost involved emotionally, we tend not to let go and are more willing to let our mind be clouded from sound reasoning but rather try to see the original idea all the way through. In trading, this represents an unbalanced willingness to martingale strategies that are, in principle, high risk and should be avoided.
Trading represents freedom, but especially when it comes to freedom, any given advice is rejected, and people tend to do the opposite even if the advice is sound.
Optimism bias (humans get optimistic in adverse situations, which in trading relates to running stops and worse behavior, being very hopeful once the price goes against the trader and violating rules to keep once losses small is much harder to follow)
Pissimissim bias (once things are bad, doom and gloom are readily embraced. This, in turn, makes fading moves hard since our mind suggests if things are bad, they can only go worse)
Accountability (humans tend to interpret luck, social rank, and alike as something they deserve, and obstacles like loss are interpreted as unfair events coming from outside. In trading, only self-responsibility will make one adjust faulty behavior and improve one's game)
Spontaneity memory (Just because a solution or a choice comes first to mind does not mean it is the best. Humans have a tendency to value the first response of the mind favorably as much as this behavior is not principle based in its statistical value)
Advertisement 9 We all tend to believe we are independent of the influences of advertisements. Yet, we are highly influenced by various cues and sophisticated techniques that trigger our behaviors. It is essential to develop humility of how easily we are manipulated to maneuver through markets with a clear mind that can objectively distinguish facts)
Negativity bias (Humans tend to foresee the future to be grim and the past filled with pleasurable memories. This bias can hurt a trader massively who isn't accurately keep measurable data to evaluate his or her performance honestly)
Associative preferences (since humans are unable to face an unlimited data stream of every moment being unique, we limit data flow by constant comparison of similar seeming events. For traders, this sets a bias in the way that the first thing you find as a comparison match sets the tone for everything that follows and unevenly gives a bias to every event in the market once labeled)
Defending beliefs(We try to avoid, disagree with and dismiss any data that offends our beliefs and values. This effect can cause detrimental outcomes in trading if any element necessary in a principle-based process chain is misaligned with one's beliefs. As such, it is essential to question oneself and one's beliefs under this premise to break unwanted pattern repeats that cause the trader fear, loss, or a lack of self-confidence.
The above are just a few examples of how humans are not necessarily ideally wired to evaluate their surroundings and themselves. They point out the necessity for successful trading to be open-minded, inquisitive, and generous with self-exploration. Approaching oneself with an open mind, the markets, and our reactions to them with humility, and checking the ego at the door to allow for a development process are core pillars to a successful path of consistent results in the markets.