What does it look like when you are trading your best?
What does your decision-making process look like?
What is your state of mind?
When I am trading my best I am approaching the markets from a process-based, detached, unbiased, and non-judgemental perspective.
Like most traders after a string of losses or gains (or an uneven streak of results), I can sometimes find myself inclined to desire a particular outcome after putting on a trade.
This is the basis for biases to appear.
The bias that we often experience in trading is a desire for a preferential outcome which can subtly affect how we perceive things and our beliefs concerning those matters.
One of the most important facets of trading well is the ability to objectively perceive the markets with a mind that is unencumbered and open to both potential opportunities and threats.
The key to developing this flexible mindset is to continually and diligently challenge one’s assumptions and presuppositions.
To that end, there are 4 powerful questions that can get to the heart of your biases and beliefs.
These 4 questions are inspired by and found in The Book of Beautiful Questions.
The 4 questions are:
1. What am I inclined to believe on this particular issue?
Start by trying to articulate your beliefs/biases.
2. Why do I believe what I believe?
This go for the “jugular question,” popularized Nobel Prize-winning physicist Arno Penzias, forces you to consider the basis of those beliefs.
3. What would I like to be true?
The “desirability bias” can have an even more contaminating effect than the confirmation bias and may lead you to think something is true because you want it to be true.
4. What if the opposite is true? And what if I’m wrong?
This question is inspired by “debiasing” experts and asks you to argue both sides of the debate and to consider the consequences of being wrong.
I regularly use these questions as part of my daily market review routine or anytime I want to challenge my convictions and to try to see things from a fresh pair of eyes.
I highly recommend posting them somewhere which will catch your attention and give you a moment to reflect before making your next important decision.
How do remove biases from your decision making and trading? What are your favorite questions you like to ask yourself?