Download pdf - We Are Who We Are and We Start From Where We Start

7/31/2019 We Are Who We Are and We Start From Where We Start

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We are who we are and we start from where we start

Each of us brings unique strengths to the markets

Every morning we agree to play as delighted beginners

Reality Pays. The more our minds model the market, the more in synch we get

We build on our strengths and manage everything else.

The outcome we have is the outcome we want

If what you are doing isnt working over and over again, re-examine your internal

models

Our internal process is more important than anything else because it drives

everything else

You have the resources to improve your mental trading game. Coaching just helpsfind them

We begin our trading practice slowly and build it with flow and grace

Lean into fear. Fear is a primary cause of failure

If you are frustrated with the markets, that means they arent following the internal

model you have projected on them

We increase the level of our awareness rather than the intensity of trading

As we expand our awareness, our interventions will happen sooner and be morecreative and effective

We respect ourselves and celebrate our profits no matter how large

If we can experience a new behavior for a moment, we can experience it for a minute,

an hour, a week, a year.

Change happens when we experience a new behavior that is aligned with who we are,

feels emotionally satisfying in the moment and takes us to where we want to go

Avoidance is buying pain on credit with interest

If self-criticism made us trade better we would all be rich

We allow the markets to breathe through us

The markets are messy, our information is imperfect, our systems will fail and we can

still make money


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All trading systems are successful in some markets, all trading systems will

eventually fail in all markets

The markets dont care about you or your position

We seek the practice rather than the result

Learn about yourself with the delight of an anthropologist finding a lost tribe

We make internal maps of the market, but our maps are always distorted

Our negative responses are created by our maps, not the market

By changing our map, we change how we respond to the markets

All our trading errors have an ultimate positive purpose or intention

There is no failure just feedback

You have all the resources you need, although some may be out of your

awarenessHuman Psychology is to follow the crowd, and do as others do. However, in

stock trading, if you listen to and follow the crowd, you will always lose in the long

wrong.

In the end, the difference between between the consistent winners and everyone else

is simply this: The best stock market traders are not afraid.

The aren't afraid because they have developed attitudes that give that give them the

greatest degree of mental flexibility to flow in and out of trades based on what the

stock market is telling them about the possibilities from its perspective. They

understand human psychology. And they understand that learning psychology is very

important.

At the same time, the best stock traders have developed attitudes that prevent them

from getting reckless. They understand human psychology and they have developed

the proper stock trading psychology mindset.

95% of the trading errors you are likely to make - causing your money to just

disappear before your eyes - will stem from your attitudes from the four primary

trading fears:


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1. Fear of being wrong

2. Fear of losing money

3. Fear of missing out

4. Fear of leaving money on the table

When you are fearful, no other possibilities exist. You can't perceive other possibilities

or act on them properly. Fear is immobilizing. Physically, it causes us to freeze or run.

Mentally, it causes us to narrow our focus of attention to the object of our fear.

This means that thoughts about other possibilities get blocked. You won't think aboutall the rational things you've learned about the stock market until you are no longer

afraid and the event is over.

Then you will think to yourself; "I knew that. Why didn't I think of it then? or, "Why

didn't I act on it then?"

We've all seen people who have gotten everything they've ever wanted... whether it's

driving expensive cars, traveling the world or having fantastic relationships with theirfamily and friends... the question is... how did they get this lifestyle?

It's simple... these people have discovered the techniques that allow them to achieve

ALL their goals, and they challenged their fears.


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Behavioral finance

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Topics

The central issue in behavioral finance is explaining why market

participants make systematic errors. Such errors affect prices and returns,

creating market inefficiencies. It also investigates how other participants

arbitrage such market inefficiencies.

Behavioral finance highlights inefficiencies such as under- or over-reactions

to information as causes of market trends and in extreme cases of bubbles

and crashes). Such reactions have been attributed to limited investorattention, overconfidence, overoptimism, mimicry (herding instinct) and

noise trading. Technical analysts consider behavioral economics' academic

cousin, behavioral finance, to be the theoretical basis for technical analysis.

[18]

Other key observations include the asymmetry between decisions to

acquire or keep resources, known as the "bird in the bush" paradox, and

loss aversion, the unwillingness to let go of a valued possession. Loss

aversion appears to manifest itself in investor behavior as a reluctance tosell shares or other equity, if doing so would result in a nominal loss.[19] It

may also help explain why housing prices rarely/slowly decline to market

clearing levels during periods of low demand.

Benartzi and Thaler (1995), applying a version of prospect theory, claim to

have solved the equity premium puzzle, something conventional finance

models have been unable to do so far.[20] Experimental finance applies the

experimental method, e.g. creating an artificial market by some kind of

simulation software to study people's decision-making process and behavior

in financial markets.

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Models


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Some financial models used in money management and asset valuation

incorporate behavioral finance parameters, for example:

Thaler's model of price reactions to information, with two phases,

underreaction-adjustment-overreaction, creating a price trend

One characteristic of overreaction is that average returns following

announcements of good news is lower than following bad news. In other

words, overreaction occurs if the market reacts too strongly or for too long

to news, thus requiring adjustment in the opposite direction. As a result,

outperforming assets in one period are likely to underperform in the

following period.

The stock image coefficient


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1.0 RATIONALE OF THE TOPIC

2.0 DEFINITIONS OF THE CONCEPTS

3.0 APPLICATIONS OF THE TOPIC IN BANGLADESH

4.0 APPLICATIONS OF THE TOPIC IN BUSINESS

5.0 PERCEPTION:

Gestalt laws of organization: creation of stock portfolio from individual

stocks

Bottom up and top-down: do you invest according to the index rate or do

you look at individual stock prices.

6.0 LEARNING:

Operant Conditioning: response is strengthened or weakened by a favorable

or unfavorable response. Soif a stock performs consistently well do you

put more money into it? Positive reinforcement and punishment.

Schedules of reinforcement: regular dividends and irregular dividends.

Observational Learning: Learning through imitation

7.0 INTELLIGENCE:

Reference to following article: (Grinblatt, Keloharju and Linnainmaa n.d.)

IQ and Stock Market Participation:

Mark Grinblatt UCLA Anderson School of Management

Matti Keloharju Helsinki School of Economics and CEPR

Juhani Linnainmaa University of Chicago Booth School of Business

An individuals IQ stanine, measured early in adult life, is monotonically related to his

stock market participation decision later in life. The high correlation between IQ and

participation, which exists even among the 10% most affluent individuals, controls for


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wealth, income, and other demographic and occupational information. Supplemental

data from siblings are used with both an instrumental variables approach and paired

difference regressions to show that our results apply to both females and males, and

that omitted familial and non-familial variables cannot account for our findings. IQ

also is related to diversification. High IQ investors are more likely to hold mutual

funds and larger numbers of stocks, other things equal.

8.0 MOTIVATION:

Arousal approaches: to maintain certain levels of stimulus and activity

Incentive approaches:

Maslows Hierarchy: what need is involvement in the stock market?

Need for power, achievement and affiliation?

9.0 PERSONALITY:Defense mechanisms: what mechanism do people use when their stocks are

performing gladly?

Self-esteem: low and high and the preference of share buying

10.0STRESS AND COPING:

Categorizing stressors: daily hassles most of the time but cataclysmic

events for some

Problem and Emotion focused coping:

Type A personality: risk taking

11.0RECOMMENDATION