May

6

In a concerted effort to keep sane when a trading thesis blows up, I simply say, “wrong or early, no difference” and we just exit our positions. I may keep an eye on the idea and try to work it through a bit more, but it’s very easy for me to get sucked into the vortex of "Why, Why, Why"; over time, losses stemming from this type of target fixation have taught me that this must be avoided at all costs.

I learned of this concept when I started to ride a motorcycle. For those who have never been on a bike, given a bit of throttle it will simply go in the direction that you’re looking at.

Target fixation is when newer riders lock their eyes (and their brain) onto the very thing they need to avoid. By doing this, they fail to make the steering adjustments necessary to miss the pothole that’s right in front of them. This can land the rider in a precarious & even life threatening situation.

Experienced riders will see a danger ahead & immediately adjust their eyes to the escape route so that their body (and their brain) will move the bike away from the hazard.

With regards to trading; it’s too easy to keep your mind tied up on why something isn’t working. You can continue to trade a broken thesis in an effort to correct for prior efforts (a form of revenge trading maybe). You get closer and closer to the pothole (& your ability to save yourself) when you need to be getting further and further away from it.


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