I wish I'd made my SQQQ trade on Friday afternoon!
I was looking at buying SQQQ on Friday at 3:57pm, three minutes before the market closed, but I wanted to study it further before pulling the trigger, I didn't know exactly what SQQQ represented yet. But today stocks are plunging in Europe already, and the US markets look to open sharply lower. I'll miss the first 3% or so of the upcoming bear market.
I'm not canceling my trade, I still think it is the right move, but I'm missing out on a chunk of profit (about $10 LOL) if I'd bought on Friday afternoon.
This is an example of the sort of cognitive biases that stock traders can experience -- wanting to maximize gain instead of accepting a good deal. It is very difficult to call the exact tops and bottoms of a market. But you don't have to call the exact tops and bottoms to make a profit.
If I figure the market is going to drop 20%, I can miss the first 3% and the last 3% and still profit from the remaining 14%.
Good traders have to ignore their emotions and adjust for their cognitive biases. Look at the facts, make your analysis, design your trades, but remain intellectually flexible --> future data may contradict your previous analysis, in which case your present analysis should change accordingly.
Even though stocks are down 3% this morning, I expect them to continue going down much farther, and I haven't seen any data to change this expectation. I'll keep my trade order, and will proceed with my eyes open.
Something similar may happen on the other end. I'll close my SQQQ position at some point, but it might be before the market hits bottom, and part of me will regret closing the position "too early" instead of taking my winnings.
As with playing poker, if you want to play the market successfully, you need to know all the rules and permutations of the game, you have to know the odds of every play you make, and you have to keep your emotions in check. Sometimes you'll lose even if you're the best poker player in the world. But if you stick to playing the odds, you'll win most of the time.
I'm not canceling my trade, I still think it is the right move, but I'm missing out on a chunk of profit (about $10 LOL) if I'd bought on Friday afternoon.
This is an example of the sort of cognitive biases that stock traders can experience -- wanting to maximize gain instead of accepting a good deal. It is very difficult to call the exact tops and bottoms of a market. But you don't have to call the exact tops and bottoms to make a profit.
If I figure the market is going to drop 20%, I can miss the first 3% and the last 3% and still profit from the remaining 14%.
Good traders have to ignore their emotions and adjust for their cognitive biases. Look at the facts, make your analysis, design your trades, but remain intellectually flexible --> future data may contradict your previous analysis, in which case your present analysis should change accordingly.
Even though stocks are down 3% this morning, I expect them to continue going down much farther, and I haven't seen any data to change this expectation. I'll keep my trade order, and will proceed with my eyes open.
Something similar may happen on the other end. I'll close my SQQQ position at some point, but it might be before the market hits bottom, and part of me will regret closing the position "too early" instead of taking my winnings.
As with playing poker, if you want to play the market successfully, you need to know all the rules and permutations of the game, you have to know the odds of every play you make, and you have to keep your emotions in check. Sometimes you'll lose even if you're the best poker player in the world. But if you stick to playing the odds, you'll win most of the time.