I've been reading a book on criminal investigation and came across a chapter that deals with what investigators should keep in mind so as not to fall into the trap of fallacious reasoning. The following is deducted therefrom and applied to trading. It mirrors what I believe to have lived though myself and also found spelled out in part over at TraderFeed over several posts.
It appears we human animals succumb to fallacious reasoning for several reasons:
a. abstract nature of premises (abstract = theoretical ; premise = proposition from which conclusion is drawn )
b. emotive quality of trading (emotive = characterized by exciting emotion)
c. mental mindset or condition (i.e. the strategies of the present and future are based upon successful strategies used by the trader in the past)
d. fixation (i.e. preconceived notions are adhered to even in the face of contradictory evidence)
e. verification bias (i.e. failure to seek disconfirmatory evidence even though trading requires the active seeking of evidence that contradicts the hypothesis for putting on a trade)
f. wanting to see taking over reasons for holding a trade versus expecting to see based on probabilities
e. intellectual and cognitive abilities of individual at hand (basically: I might be to thick to see what the deal is even if it's laid out in front of me - reminds me of math class at college)
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