must study the psychology of futures. Many investors think that they have excellent mental qualities, but this is only a superficial understanding. The following nine trading mentalities are fatal. We are all ordinary people, and it is inevitable that we will be led by human primitive instincts. These instincts can help us decide whether to wait for a good opportunity to invest in the market or to leave the market during the investment process. But the impact of these instincts in investment may be positive or negative, and produce a certain psychological bias. Investors must be alert to psychological biases and avoid falling into such biases. Here are 9 psychological biases that investors are vulnerable to.
The first deadly trading mentality: home bias.
Family is the most comfortable place. But it doesn't mean that in your portfolio. This home bias of gold investors will hurt their investment potential because they are affected by home bias and cannot make a richer portfolio of their investments. Investors have even ignored those developing countries with plenty of opportunities.
The second deadly trading mentality: always make easy choices.
Some reality is: if you think there is an easy choice, you are more likely to choose it. But when people have a lot of technical information about investing in a futures product, and this product has a great decline compared with before, people are even less willing to invest in this futures product in their subjective consciousness. In fact, this is often the best time to invest in such varieties.
The third deadly trading mentality: the gambling mentality.
If you think your futures investment is a gamble, then you may not have done enough research on your investment. Because the gambler mentality is a huge hazard to long-term investment success, a successful investor decides what proportion to buy or sell according to his actual situation and investment environment, instead of betting with a gambling mentality.
The fourth deadly trading mentality: short-term thinking.
The foundation of short-term thinking is personal short-sighted behavior. Especially in the investment process, short-term behavior is outright speculation. Short-term thinking will make investors frequent in and out of the market. On the face of it, the utilization rate of funds has been improved, but the risk has multiplied in the process of frequent market entry and exit. This also responds to the old Chinese saying: often walk by the river, there are no wet shoes.
The fifth deadly trading mentality: unable to get out of recent events.
Human thinking has stagnation, which can cause misjudgment in investment. For example, during the financial crisis of 2008-2009, many investors focused on protecting their assets from another market collapse, rather than seizing opportunities to profit after the market stabilized.
Because humans are more likely to stay stuck in their own mindset, whether it's about good news or bad news. And it’s easier to ignore long-term development trends. However, in investment, past performance does not prove the quality of future investment returns.
The sixth deadly trading mentality: overconfidence.
Most people have full confidence in their own various skills. In investment, this overconfidence can cause many problems, such as over-concentration of the investment portfolio, or investment by predicting market development instead of insisting on long-term investment plans . This overconfidence often leads investors to put eggs in a few baskets, and these baskets are always close to each other.
The seventh deadly trading mentality: confirmation bias.
This confirmation bias is very similar to overconfidence. When the confirmation bias dominates in consciousness, you will grab any information to confirm your own ideas.
The eighth deadly trading mentality: unacceptable loss.
Almost all of us have experienced some degree of investment loss and hate this loss. And this mentality continues to cause investors to lock in their loser mentality, and in order to avoid another investment mistake, they even stay away from the investment market.
In fact, the main factor that really determines whether you continue to invest or sell out must be the potential future returns and related risks, rather than being depressed by previous effects..
The ninth deadly trading mentality: the herd mentality.
If everyone is doing a certain thing, the market will look vibrant. On the surface, this is very easy to understand, and there is no need to explain it too much. But in investment, this is exactly the opposite.
Buffett was once asked the secret of investment success. His answer was to fear when others are greedy, and to be greedy when others are fearful. This directly shows that he is buying when the price is low and selling when the price is high. This is the secret of successful investment.
This is the psychology of futures, and these nine trading mentalities are fatal. So when you invest, you must stay away from these mentalities and learn more positive and correct trading methods to make your trading even more powerful.
In fact, it is not so difficult to do futures. Finding effective methods and tools can help traders.
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