The lack of objectivity in trading

One thing that seems to hurt traders is that they can't remain objective. It causes them to miss opportunities to trade or more commonly to refuse to exit a losing trade that's clearly telling them it's not working out.

Most people have a bias. I see it even here in the forums. A question will be posted. Someone knowledgeable will answer, and the answer will be refused, through no other reason than it isn't the answer the questioner wanted or doesn't fit with his beliefs, truth is irrelevant to most. Those who can be objective look on in dismay as several people attack the person who provided a sensible and correct answer.

A similar example would be EURUSD for the past few weeks. The number of traders going long, getting stopped out, going long, scratching for breakeven, going long again and again, and losing again and again, and missing the objective fact that EURUSD was falling and it was easier to short. A few people pointed this out, and others turned on them. Same underlying phenomenon, different topic. The truth makes people angry if it doesn't match the way they want to see something. But you can't argue with the trading results, they're objective.

Another one, on EURUSD there were also people who said that there was no opportunity to get short? Amazing. It fell for 3 straight weeks and they couldn't find one place to short. How do they think it's going down if nobody can find a place to sell? Is the market supposed to fit into your belief structure or are you supposed to adapt to it?

The mind can very powerfully ignore even major details. Is what you're making trading decisions on even real? Are you sure you're seeing the reality? How do you know?

So what steps do you take to ensure that you do see the full picture in trading? What steps do you take to take to make sure you're not fooling yourself?


P.S. I'm already fairly confident this sort of thread is not going to be popular (bias or objective truth?).

Personally I have begun to look only at the daily or even weekly charts and I consider everything below of non value.

To expand your EURUSD analysis, I see a just formed double top with an uptrend clearly broken, maybe a change in direction but it's too early to tell.
My analysis is that if the 1.3700 is tested before returning and going through 1.3575 and lower we could be on a new down trend.

Ok so you say it's not in a downtrend. I'm not going to argue against that, but wondering is that an objective decision or a subjective one? In other words do you have a clear set of rules that say to you, this is not a downtrend yet. Or is it a general judgement. Also would you consider longs for the past few weeks in EURUSD?

I don't own the truth, just trying to guess with my experience, that's it.

The rules to define a trend is higher highs for up and lower lows for down, I try just to apply that simple rule.

Now look at the picture I posted, I see a clear up trend (red trend line) and I think I'm objective but the last top formed a double top which could signal a change in direction but again, it's too early to say that. We could also be in a consolidation phase before resuming the previous trend.

Hey that's fine brokertrader. I'm just trying to make the point that what we think we see, is not always what is there. I don't have a problem with people making subjective judgments, just wondering what techniques people use to avoid making subjective judgements.

Based on your post, I think you have some. You do have a bias and you have reasons for it. Maybe it's not clear exactly why, but if you have objective reasons, then that's something.

No problem Supra

That why I said what I think I was seeing and at the same time that I needed some confirmation from the chart, this will come in the future days and weeks. Maybe it could be interesting to follow...

Another picture to explain better what is my big picture.

I started to change my trade journal with some functions; it dont will count me a positionsize if i am goint to break my rules. its not perfect but a little assistance. If you dont trade automatic there always will be a part of subjektiveness but this isnt ever bad.

does somebody know why the most trader have the naturally characteristic to go Long if the the rate is falling down(strong trend)? i know how the rules of the market are (Sentiment) but why i have sometimes the slope to do it too? it seems to be a native characteristic of people.

Being a psychologist doesn't harm at all

- The disposition effect - the tendency of investors to sell assets whose price has increased, while keeping assets that have dropped in value. Its a known fact that rationality/objectivity and money don't always meet

Yes. That's why I think it's so important to have measures in place to ensure objectivity as much as possible.

I think part of the problem is that a lot of traders look at a chart and think, what's going to happen next, I think it's a big mistake, you should have your own setups that you trade and wait for them to appear, forget about other peoples views, stick to your own setups, sometimes you will be wrong but as long as you know in the long run that your setups are profitable then you will be fine.

Doing this cuts out a lot of the subjectivity, the decision you need to make is whether the chart fits your setup or not otherwise you 're thinking, is it going up, is it going down, is it a trend, is it the start or end of a trend, is it this is it that, it doesn't matter, you're question should be, does it match the setup I'm looking for or not?

thanks a lot. i had read about it two years ago but forgot it. But its more a metapher of it than the actual situation.

thats right but if you trade discretionary and you have a bad day then the rules are quick forgotten (I personally at least) but you are right if i would say i just trade with the trend it woulb be no problem.