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Loss aversion, confirmation bias, herd behavior. Where the mistakes individual investors keep repeating come from, and the habits that cut them down.
The first thing to beat is not the market but your own emotions. Writing the plan down is the easiest defense.
Two people look at the same chart and reach different conclusions. The difference is usually emotion, not information. Most of the mistakes individual investors repeat come from the three biases below.
A loss feels about twice as painful as a gain of the same size. So we sell winners early because we want to lock in the gain, and hold losers for a long time because we do not want to lock in the loss. The result is short gains and long losses. That is the opposite of the plan.
Once you own a stock, only its good news catches your eye. Even after the reason you bought has broken, you look for a new reason and attach it. If you did not write down "I sell if this condition breaks" before buying, you will not find a reason to sell when it is time.
When everyone is buying, the stock has usually risen a lot already. When everyone is selling, it has usually fallen a lot already. The moment when news and forums are loudest is often the most dangerous one. When nobody cares, things are quiet.
This is also why Confluence Zone always judges on daily bars and gives signals rarely. If the conclusion changes every time you switch the chart timeframe, people end up picking the timeframe that shows the answer they want. Our backtest record has seven rule changes that looked sensible and actually lowered performance. They show a common way emotion seeps into rules.
This article does not cover personality assessment, counseling, or psychological calls on any particular stock. Everything here is reference information based on past, public data and is not investment advice.
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