If your portfolio has been suffering through this bear market, you are probably dealing with a trading bias. It can happen to any of us. You want a trade to work no matter what and become blind to the clues embedded in the charts.
I know this behavior well, because I used to struggle with trading biases. I would will the markets to move in a certain direction based on the positions I held. This was totally irrational behavior, of course. It would usually end badly, because I was no longer evaluating charts, price and volume objectively. I wanted to win, and I wanted to do it my way.
This behavior nearly destroyed my trading portfolio.
It takes a big leap of faith to make changes in how you view investing, markets, charts and trading. But if you want to thrive as a trader and earn income from options trading over the long-term, you must work to recognize and tamp down trading bias.
How to remove trading bias
I would be lying to if I told you I have zero trading bias. We all do. However, once you decide that technical analysis should drive your trading, you are on the right track.
Before you buy or sell, double check the technicals. What is the chart saying? What about the technical indicators? And have you looked at sentiment indicators as well? If you are in a chat room, run your idea by fellow traders. Getting an outside perspective is always helpful.
When you have a trade on and it starts tanking, show your ego the door. Even if you were 99% sure it was going to be a big winner, it’s OK to admit defeat. Don’t hold onto it – sell it. Get out before your ego destroys your account (something I’ve seen happen far too often).
Finally, practice good risk management and size your positions correctly. This is a surefire way to remove trading bias. Never risk more money than you are comfortable losing. How many times have you lost sleep over a position because you couldn’t afford to lose a certain percentage of the trade? Been there, done that.
As long as commit to technical analysis, ignore your ego and right-size your positions, you’ll watch your performance improve. Your portfolio will thank you.