Thursday, January 27, 2011

fear of height and depth in trading!

many traders don't feel comfortable

to buy "high".

they like to buy "low"

--

but their is a fundamental flaw in this thought!

how do we know that a "high" is a "high"

and a "low" is a "low"?

a "high" is a "high" when compared to a "low"

but it is a "low" when compared to a "high"!

similarly,

a "low" is a "low" when compared to a "high"

but it is a "high" when compared to a "low"!

--

this is the reason

why traders

who are looking for a "low" to enter

hesitate to enter even much lower than their "low"

--

this is the reason

why traders

who are looking for a "high" to book profit or short

hesitate to do so even much higher than their "high"

--

in behavioral psychology

this is known as "recency bias".

--

so, what's the solution?

just do what your method

or trained gut says!

don't bother about

your fear

of heights

or depths!

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