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Combating Recency Effects in Trading


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Combating Recency Effects in Trading

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  #1 (permalink)
 ptcm 
Taiwan
 
Experience: Intermediate
Platform: TradeStation
 
Posts: 68 since Jun 2010
Thanks: 8 given, 13 received

not sure if this happened to you guys, but I have had this problem from time to time.

I had a great SHORT trade in HSI futures yesterday. Somehow I came in this morning with a short bias unsubconsciously . I went short. Mkt initially went lower but reversed. I did not cover/reverse my position as quickly as I should be. Ususally I do this real quick as soon as the entry point is jeopardized.

I've reviewed my entry point and indicators. I've found no other reasons except for "Recency Effects."

You always remember your last great trade, even though it has no correlation with your brandnew trade whatsoever. Somehow my brains just play tricks on me.

Anyone has experience on how to overcome that ?

many thanks..

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  #3 (permalink)
NYSE
Europe
 
 
Posts: 13 since Oct 2010
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A very good question indeed.

All human beings are habitual - no need to know why, just know it is a part of life. We tend to repeat certain things we do very often, and other things not so often - the "often" things are either things we "have" to do, or things we "like" to do.

To become a consistent winner at trading, one must be able to switch off completely form the normal day things that we are used to - this requires a strong will and dedication, and is far harder to do than many think!

To me, what you have described seems to indicate that you have not done adequate groundwork before placing the trade, and you have allowed a previous trade prevent you from doing what you "need" to do.

I have a Rule No.1 that works very well for me, and that is..

"EVERY trade is a loser, until it is closed for a profit"

NYSE

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Last Updated on October 24, 2010


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