Imagine this: You’ve spent months, maybe years, fine-tuning a single systematic trading strategy. You’ve backtested it, refined it, and finally—finally!—it works. You’re consistently profitable, and for the first time, trading doesn’t feel like a rollercoaster of...
I have four things for you this week: A very interesting market update given the turmoil in the markets this week A psychological bias that is super common and really hurts traders Position sizing tip to keep you in the game How to think about stop losses to improve...
Loss aversion is a psychological bias where the pain of losing feels much stronger than the joy of winning—a core concept in trading psychology. In everyday life, this explains why people avoid selling a house at a loss, even if it's a rational decision, or why they...
Imagine you’re watching the market like a hawk, and suddenly, prices nosedive. Your heart skips a beat. Should you sell everything? Should you buy more? Should you shut your laptop, pretend it never happened, and pour yourself a drink? Every trader has been there. The...
The Disposability Effect is a cognitive bias where people undervalue things they already own, leading them to discard useful resources prematurely. Imagine buying a high-quality kitchen appliance, only to throw it away after a few minor issues instead of repairing it....
As humans, we love to stay consistent with our past decisions even when they’re wrong. This is known as Commitment and Consistency Bias, a cognitive shortcut where we subconsciously justify and stick with previous choices to avoid the discomfort of admitting...
The Decoy Effect is a well-documented psychological bias that subtly manipulates decision-making by introducing a target option that makes one of the other choices appear significantly more attractive. This subtle manipulation was first introduced in a 1982 study as...
The contrast effect is a cognitive bias where our perception of something is influenced by what came before it. Humans are particularly susceptible to this bias, especially when it comes to how we perceive stock prices and value. You would think a bottle of wine that...
The House Money Effect is a psychological bias where people treat money they’ve recently won (or earned easily) as less valuable than their original capital. This leads to riskier decisions like a gambler taking bigger bets after a hot streak. This cognitive bias,...
The Chaikin Money Flow (CMF) is a volume-based trading indicator developed by Marc Chaikin. It measures the volume of money flow into or out of a security over a given trading period, typically 21 trading days. The core principle behind CMF is that when closing prices...