On the first day of class, Professor Bazerman announces a game that seems innocuous enough. Waving a twenty-dollar bill in the air, he offers it up for auction.
How even after knowing everything about your work, a series of emotional judgments can place you in a difficult situation.
A thread on how loss Aversion causes us to take irrational decisions-
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On the first day of class, Professor Bazerman announces a game that seems innocuous enough. Waving a twenty-dollar bill in the air, he offers it up for auction.
The winner of the auction, of course, wins the bill. But the runner-up must still honor his or her bid,
In other words,this is a situation where second best finishes last. Indeed, at the beginning of the auction, as people sniff out an opportunity to get a $20 bill for a bargain, the hands quickly shoot up, and the auction is officially under way
There is a collective hard swallow. As if sensing the floodwaters rising, the students get jittery.
Without realizing it, the two students with the highest bids get locked in. "One bidder has bid $16 and the other has bid $ 17," Bazerman said.
Up to this point the students were looking to make a quick dollar; now neither one wants to be the sucker who paid good money for nothing.
Like a runaway train, the auction continues, with the bidding going up past $ 18, $19, and $20.
"Of course," reflected Bazerman, "the rest of the group roars with laughter when the bidding goes over $20."
But that's easier said than done. Students are pulled by both the momentum of the auction and the looming loss
The two forces, in turn, feed off each other: commitment to a chosen path inspires additional bids, driving the price up, making the potential loss loom even larger.
Over the years that Bazerman has conducted the experiment, he has never lost a penny (he donates all proceeds to charity).
This example was from the book, Sway.
When you Buy something at 100 , it goes to 110 and you didn’t sell, when it comes back to 105 you cant sell,and then you sell it way lower. because you felt again it will go up.
Traders feel loss 2X the emotions we feel when we are in profits.
How to avoid loss aversion bias-
1. Think of long term instead of short term results.
More from Trader knight
Thanks for reading :)
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A thread on Pyramiding- pic.twitter.com/8EOSSFMZ2w
— Trader knight (@Traderknight007) December 27, 2020
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— Trader knight (@Traderknight007) November 29, 2020
If you do change them frequently then this thread is for you.
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[Thread]\U0001f447\U0001f447\U0001f447 pic.twitter.com/pEUr0wH354
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A thread on Trend-lines pic.twitter.com/GsLGzl8A3c
— Trader knight (@Traderknight007) January 2, 2021
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A thread on SCALING IN - OUT METHOD - pic.twitter.com/bJ1N5ZjAiK
— Trader knight (@Traderknight007) January 9, 2021
This contains some of the best threads and articles on various topics related to trading, that I have posted till now.
Enjoy!😊
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I have been asked many times about my views on Closing basis Stop loss.
— Trader knight (@Traderknight007) November 5, 2021
So here's a thread on the same. pic.twitter.com/qFgujKAFqS
A thread on
Experience don't count in trading IMO, i can show you people who are trading from last 20 years and still losing money and i can also show you people who are in market since 3-4 years and are Profitable.
— Trader knight (@Traderknight007) June 25, 2021
What matters is how much time do you take to learn from a mistake,
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90% of the difference between the performance of a super trader and a normal joe is due to the position sizing.
— Trader knight (@Traderknight007) July 3, 2021
In this article, we will learn why position sizing is important and how we can implement it by learning 3 effective position sizing techniques.https://t.co/gWS4Ifi4OJ
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— Trader knight (@Traderknight007) July 17, 2021
And the lessons that I learned from them. \U0001f447https://t.co/NCwMM8SVYz