Chapter 11 of 12All chapters
Chapter 11 of 12
Psychology and mistakes
Why most losses are self-inflicted.
The usual errors
Buying after a rise and selling after a fall is the most common pattern, and it is the exact reverse of the intention. Loss aversion makes people hold losers and sell winners.
- Confirmation bias makes research feel thorough while only agreeing with you.
- Overtrading multiplies costs and rarely improves the outcome.
Written rules
Deciding in advance what you will buy, how much and when to review removes the moment of panic from the decision. The rules matter less than having them.