Biases, Perceptions and Poise.

Perspective and clarity

A share price is at the mercy of market sentiment and investors are often affected very much in their decision making by such emotions as anchor bias, and other such like confirmation, information, loss aversion and hindsight biases.

Definitions of these are readily available on the web and are recurrent examples of why investors make trading or investing mistakes and I discuss this in my YouTube videoMy 5 top tips for success on the stock market.

PGH example

So, using the example of PGH above I would think now many previous investors are somewhat shy (anchor bias) of investing back into PGH. Righty so maybe but you might remember the ‘emoji guide to investing I showed in last week’s Radar Newsletter (25/1/19) demonstrating the fact that the key to consistently successful investing is to be poised and maintain a balanced perspective no matter what the market is doing.

Looking through the haze

Right now, PGH investors are suffering but realistically having halved in price back to its initial starting price at listing and is now showing potential demand at this support level the stock must go on the radar again of starting to look valuable and having to potentialfor a turn back up. Not that I want a long-term investment because that’s not how I play the stock market, but these points can often be scrambling points when a change of sentiment can take hold and trigger all sorts of portfolio rebalances, short position exits and fresh ‘value’ buying etc. Looking at the stocks afresh with clarity and perspective can be hard because of our biases but that’s what we need to be able to do.

Focus on your own style

My style of trading and investing is looking for those types of investor changes that can trigger sharp price moves and new trends to capitalise on. PGH and many other stocks are currently in this position and over coming weeks I will point you to a few of these opportunities that this falling market has now delivered.

Bull or Bear?

Whether the ASX/200 rises of falls from here is to a large degree irrelevant when assessing individual stock performances. Yes, a rising market offers more opportunities and a falling market less, but still opportunities always arise in any market and this one is no different. Are we in a correction phase or beginning a new wave higher? That is always the eternal question. Don’t even try and answer it because you can’t and it’s simply a major distraction. Keeping a clear head is vital.

How to play it

Smart stock investors always remain poised and have the ability to have good perspective without biases and emotions. This will help your success rate immeasurably.

Sharpening your trading and investing psyche

I understand the mental battles we all have, having gone through them myself, but successful investors and traders all eventually understand two things very clearly.