I picked this interesting test done by Dr. Shapiro in the book “Trading For A Living”written by Dr. Alexander Elder. Do try this out for it is very important concept to grasp in stocks, so please be honest. First, try not to think too much and use your instinct or feeling to answer, then try again after thinking properly and carefully… See if your answers are the same before proceeding to the explanations, hehe… this can be quite fun:
Part 1:
If I give you two choices: 1) A 75% chance to win RM1000 with a 25% chance of getting nothing. Or 2) A 100% chance to get RM700. Which would you go for?
Part 2:
If you are given two choices: 1) A sure 100% loss of RM700 Or 2) 75% chance of losing RM1000 but a 25% chance of loosing nothing and keep all your RM1000?
Explanations:
For part 1, four out of five subjects will take the second choice. The majority makes the emotional decision and settles for a smaller gain.
For part 2, three out of four will take the second choice, condemning themselves to lose more in their effort to avoid risk, they actually maximize their losses…
Emotional traders want certain gains and turn down profitable risks that involve uncertainty. However, they will go into risky gambles to avoid taking certain losses. It is our human nature to take profits quickly and postpone taking losses. Irrational behavior increases when people feel under pressure.
If you were to look into your account, you will realize that the major burns that you have is a few large losses that was there because of your inability to cut loss. Or it might be the continuous small loss made because you were under pressure to cover back the loss you made. All these only proves once again how important money management and cutting loss is in trading…
Part 1:
If I give you two choices: 1) A 75% chance to win RM1000 with a 25% chance of getting nothing. Or 2) A 100% chance to get RM700. Which would you go for?
Part 2:
If you are given two choices: 1) A sure 100% loss of RM700 Or 2) 75% chance of losing RM1000 but a 25% chance of loosing nothing and keep all your RM1000?
Explanations:
For part 1, four out of five subjects will take the second choice. The majority makes the emotional decision and settles for a smaller gain.
For part 2, three out of four will take the second choice, condemning themselves to lose more in their effort to avoid risk, they actually maximize their losses…
Emotional traders want certain gains and turn down profitable risks that involve uncertainty. However, they will go into risky gambles to avoid taking certain losses. It is our human nature to take profits quickly and postpone taking losses. Irrational behavior increases when people feel under pressure.
If you were to look into your account, you will realize that the major burns that you have is a few large losses that was there because of your inability to cut loss. Or it might be the continuous small loss made because you were under pressure to cover back the loss you made. All these only proves once again how important money management and cutting loss is in trading…
4 comments:
Their Standard reply - "You buy, sell or hold at your own risk absolutely."
Then the say "Never blame others for your own action."
I still caution everyone
BEWARE _ BE CAREFUL _ YOU MAY THINK THE INFORMATION HERE IS INFORMATIVE AND CAN MAKE YOU MONEY _ DON'T.
MANY SUCH BLOGS HAVE MADE PEOPLE POORER>
MAXFORCE - AND BURSAMASTER - THE SAME. READ THEIR CALLS IN BURSAMASTER's BLOG.
THEY CALL FOR A BUY AFTER THEY HAVE BOUGHT SO THAT YOU CAN HELP TO PUSH UP THE PRICE FOR THEM> THEY HARDLY EVER TELL YOU WHEN TO SELL UNLESS THEY WANT YOU TO SELL BACK TO THEM AT LOW PRICES > DO YOU KNOW WHY? BECAUSE WHILE YOU ARE BUYING THEY ARE SELLING> AFTER THAT WHEN PRICE COMES DOWN< THEY SAID MARKET CORRECTION-HEALTHY OR "OPERATOR" COLLECTING AND THE PUSH WILL COME SOON>
TYPICAL TRICKS.
SO BE CAREFUL BE WARY OF MAXFORCE
Their Standard reply - "You buy, sell or hold at your own risk absolutely."
Then the say "Never blame others for your own action."
I still caution everyone
BEWARE _ BE CAREFUL _ YOU MAY THINK THE INFORMATION HERE IS INFORMATIVE AND CAN MAKE YOU MONEY _ DON'T.
MANY SUCH BLOGS HAVE MADE PEOPLE POORER>
MAXFORCE - AND BURSAMASTER - THE SAME. READ THEIR CALLS IN BURSAMASTER's BLOG.
THEY CALL FOR A BUY AFTER THEY HAVE BOUGHT SO THAT YOU CAN HELP TO PUSH UP THE PRICE FOR THEM> THEY HARDLY EVER TELL YOU WHEN TO SELL UNLESS THEY WANT YOU TO SELL BACK TO THEM AT LOW PRICES > DO YOU KNOW WHY? BECAUSE WHILE YOU ARE BUYING THEY ARE SELLING> AFTER THAT WHEN PRICE COMES DOWN< THEY SAID MARKET CORRECTION-HEALTHY OR "OPERATOR" COLLECTING AND THE PUSH WILL COME SOON>
TYPICAL TRICKS.
SO BE CAREFUL BE WARY OF MAXFORCE
Their Standard reply - "You buy, sell or hold at your own risk absolutely."
Then the say "Never blame others for your own action."
I still caution everyone
BEWARE _ BE CAREFUL _ YOU MAY THINK THE INFORMATION HERE IS INFORMATIVE AND CAN MAKE YOU MONEY _ DON'T.
MANY SUCH BLOGS HAVE MADE PEOPLE POORER>
MAXFORCE - AND BURSAMASTER - THE SAME. READ THEIR CALLS IN BURSAMASTER's BLOG.
THEY CALL FOR A BUY AFTER THEY HAVE BOUGHT SO THAT YOU CAN HELP TO PUSH UP THE PRICE FOR THEM> THEY HARDLY EVER TELL YOU WHEN TO SELL UNLESS THEY WANT YOU TO SELL BACK TO THEM AT LOW PRICES > DO YOU KNOW WHY? BECAUSE WHILE YOU ARE BUYING THEY ARE SELLING> AFTER THAT WHEN PRICE COMES DOWN< THEY SAID MARKET CORRECTION-HEALTHY OR "OPERATOR" COLLECTING AND THE PUSH WILL COME SOON>
TYPICAL TRICKS.
SO BE CAREFUL BE WARY OF MAXFORCE
Their Standard reply - "You buy, sell or hold at your own risk absolutely."
Then the say "Never blame others for your own action."
I still caution everyone
BEWARE _ BE CAREFUL _ YOU MAY THINK THE INFORMATION HERE IS INFORMATIVE AND CAN MAKE YOU MONEY _ DON'T.
MANY SUCH BLOGS HAVE MADE PEOPLE POORER>
MAXFORCE - AND BURSAMASTER - THE SAME. READ THEIR CALLS IN BURSAMASTER's BLOG.
THEY CALL FOR A BUY AFTER THEY HAVE BOUGHT SO THAT YOU CAN HELP TO PUSH UP THE PRICE FOR THEM> THEY HARDLY EVER TELL YOU WHEN TO SELL UNLESS THEY WANT YOU TO SELL BACK TO THEM AT LOW PRICES > DO YOU KNOW WHY? BECAUSE WHILE YOU ARE BUYING THEY ARE SELLING> AFTER THAT WHEN PRICE COMES DOWN< THEY SAID MARKET CORRECTION-HEALTHY OR "OPERATOR" COLLECTING AND THE PUSH WILL COME SOON>
TYPICAL TRICKS.
SO BE CAREFUL BE WARY OF MAXFORCE
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