Trading Psychology

“Self Deception… not only will we put up with it, we love to embrace it…”

~ Doctor Stock

Grab a coffee, sit down with a few friends and begin sharing investment experiences… and after a little while, you begin to notice something… we tell more about our successes than our failures. But I’m not surprised, are you? After all, who wants to look like a schmuck in front of friends and family? So, we embellish… recreate… and re-imagine our successes as an investor, all the while knowing (deep down) that we’re stretching the truth… as are the rest of the disguised schmucks around the table.

… or do we?

Perhaps we don’t know fact from fiction when it comes to our investment history as much as we’d like to believe… Perhaps our ability, and downright desire at times, to lie to ourselves makes it nearly impossible for us to recognize the truth from the tall tales anymore… and so, by our very nature, we continue to tell ourselves a story with a better ending each and every time. This is common when the stories we tell aren’t written down… they’re merely oral recreations or remembrances… with creative flair in their retellings.

It seems that our self deception is not only something we will put up with, it’s something we love to embrace… and to our detriment. I recently reviewed the following short video clip on trading psychology which hints at this vicious circle… the tendency to lie to ourselves about losing investments as well as to hold on, and sometimes add to, our losing positions. Take a quick peak… then feel free to confess how you create for yourself more tale tails than truthful retellings of your investment woes. Until we recognize our tendency for self-deception and quit embracing it, we’re likely not ever going to develop into successful investors.