8/4/2022 Stellar Trading Psychology with Nick and Sinjin

https://youtu.be/hL8HuXdnFA4

FACT:
85% of individual investors lose money in the stock market or earn less than the return of a money market while maintaining all the risk of market declines

Two Main Reasons:
1) Failure to Understand Risk
2) Psychological Biases and Characteristics

Topics:
-learning how to evaluate risky trading scenarios
-how to "frame" or perceive an investment scenario
-CUT YOUR LOSSES SHORT AND LET YOUR PROFITS RUN, don't CUT YOUR PROFITS SHORT AND LET YOUR LOSSES RUN

Psychological biases and behaviors that cause failure in investing:
-Loss Aversion/Loss Trap
-Siegel's Paradox
-Need to be right/correct all the time
-Illusion of control
-Confirmation bias
-Gambler's Fallacy Bias
-Recency Bias / Snake Bite Effect

Common Rationalizations That Keep You In The Loss Trap!
-"It's not really a loss until I sell it"
-"The markets always come back"
-"It's down already 40%.It has to be near a bottom"
-"It's a Tax Write-off"

Summary:
Most people tend to make the same mistakes over and over due to the way they mentally frame the situation they're looking at. Instead, they need to develop an investment plan that will produce positive expected values over the long term. They need to accept losses as a normal part of trading or investing, and not let losses cause negative emotions that will cause them to have bigger losses. They need to pre-determine both positive and negative outcomes, so that they are mentally prepared and ready to take action when they occur will cause them to have bigger losses


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