Spencer Li

The Synapse Program – Full House!

Last weekend, we concluded another successful run of our 2-day program, adding another batch of new traders to our community. We had a mixture of new and old traders, as well as some previous batches of graduates sitting-in and helping out by providing useful feedback and asking relevant questions that I may have overlooked.
The Synapse Program - Full House

 

To the new traders, remember that application and practice is what it takes to make you a great trader! Do not waste the skills you have acquired – treasure them, use them, and perfect them.

It was a great weekend for me, and I would like to take this opportunity to wish you all the best, and thanks for your kind feedback and tesimonials. We will use these to further improve the program.

Feedback

“Useful for beginners and has helped me understand/know some of the terms/concepts in trading. Overall, flow is good and the essence of trading is covered well. Finally can understand your posting on the forum.”
– Mr. Koh

“Spencer is a young but very experienced trader. His program is value for money. Great for beginners and experienced traders.”
– Kelvin Ang

“A very structured, objective syllabus and system. Good for both beginners and advanced traders.”
– Joshua Leong (Entrepreneur)

“Good description of how to enter and exit the various setups.”
– Chris

“A very casual course with a good learning curve. Easy to understand explanations and a good follow-up program with the discussion forum.”
– Randall Ong

“Content was easy to follow and relevant, executable in the immediate future.”
– Andrew Lim (Royal Bank of Scotland)

To see more testimonials, click here.
https://synapsetrading.com/testimonials/

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Spencer Li

Open Seminar at CIMB Securities: The X-Factor in Trading

Last week, we have an open seminar at CIMB Securities to share about what it takes to be a professional trader. We started off with the different attributes required of a trader, then delved into our trading style, before ending off with a market outlook and stock picks.

As it was a full house event, we apologise if some of you could not make it this time. Since the response was rather good, we might consider having more of such seminars for the public in the future. Do sign up for our mailing list to stay informed!

Open Seminar at CIMB Securities

Open Seminar at CIMB Securities 2

Open Seminar at CIMB Securities 3

As we mentioned during the seminar, they keyword of the day is “SHORT”. I hope that all participants have a better idea of how we use price action to understand the past, anticipate the future, and trade in the present. Remember: only take a position just as a significant move is about to take place!

Sign up for our mailing list to keep updated of the latest workshops and seminars!
For program enquiries, please email info@synapsetrading.com

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Spencer Li

Regret Aversion Bias – Would You Rather Be Right, or Avoid Being Wrong?

People exhibiting regret aversion avoid taking decisive actions because they fear that, in hindsight, whatever course they select will prove less than optimal. Basically, this bias seeks to forestall the pain of regret associated with poor decision-making. It is a cognitive phenomenon that often arises in traders, causing them to hold onto losing positions for too long in order to avoid admitting errors and realizing losses.

 

Regret Aversion Bias

 

Regret aversion also makes people unduly apprehensive about taking positions after a string of losses, as they feel instinctively driven to conserve, to retreat, and to lick their wounds. This might cause them to hesitate most at moments that actually merit aggressive behaviour.

This can also affect a person’s response to winning positions. For example, traders might be unwillingly to sell an in-the-money position despite negative signals, choosing to cling on to it because they fear that the stock might continue to soar even higher once they sell it.

People who are regret-averse try to avoid distress arising from two types of mistakes, (i) errors of commission and (ii) errors of omission. The former occurs when we take misguided actions, while the latter arises from misguided inaction, that is, opportunities overlooked or foregone.

The other danger comes from “herding behaviour” where traders simply try to follow the crowd, since following the mass consensus diffuses responsibility and hence the potential for future regret.

What is the best solution for this?

The way out of this is to have confidence in your methods and your skill, so that despite a string of losses, you will still be able to trade consistently, because you know that in the long run, you will be able to recoup those losses and turn up a profit when you manage to catch the big moves. The key here is discipline and consistency.

“I visualized my grief if the stock market went way up and I wasn’t in it – or if it went way down and I was completely in it. My intention was to minimize my future regret, so I split my retirement plan contributions 50/50 between bonds and equities.” – Harry Markowitz, father of Modern Portfolio Theory

 

 

complete guide to investing and trading psychology cover

If you would like to learn more about trading psychology, also check out: “The Complete Guide to Investing & Trading Psychology”

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Spencer Li

The Quest for the Holy Grail: Secrets, Gurus & Software

The Quest for the Holy Grail Secrets Gurus Software

Another big danger to new traders is the idea of the holy grail of trading.

To many, the holy grail of trading is deemed to be the ultimate solution to all their trading problems, the magic bullet that will allow them to profit without effort, the secret trading method or tool that will allow them to predict the market and win on every trade. However, far from being the solution, this mentality often acts as a stumbling block to all traders, if not a brick wall.

Many people hop from tip to tip, from guru to guru, from one software to another, attending every seminar and learning from every guru, but they will never be contented, and they will never become good traders, because they are too busy finding the holy grail to put their knowledge into practice. So what is the holy grail?

 

The Quest for the Holy Grail

 

The holy grail can appear in many forms – a “sure-win” indicators, a “100% win rate” trading system, a “legendary” guru, or a “unique proprietary” software guaranteed to make you rich overnight.

They all hold the same promise – to make you rich quickly with little effort.

Unfortunately, there is no shortcut to success, no magic bullet that will make you a super trader overnight.

To them, the answer is always so near, yet always slightly out of reach. Every time they see a new method, they think “this must be it, this must be the missing ingredient.” They test it out for a few days, realise that it’s not perfect, then skip off to find the next new toy. Many don’t realise that no method is 100%.

Many people also mistake sophistication for perfection, opting to fork out money for automated systems that will print money for them as they sleep at night. However, when the system stops printing money, as all do eventually, they are once again off to find the next holy grail.

It took me many years to realise it, and I have been through at least 200 books and tried almost every method or tool available, before I finally realised that to find the holy grail, one has to look within. So if you want to start learning the skills to make consistent money on your own, you need to first get rid of this stumbling block.

Many people in trading start off with the wrong ideas, and after sacrificing a lot of time and spending a lot of money, they wonder why they still cannot get the results they desire. Others think that hard work can solve everything, and given enough time, they will naturally pick up the skills themselves. Not many succeed in re-inventing the wheel. As a world-class tennis coach used to say, “Practise makes perfect, nut make sure you are not practising the wrong thing.”

“It’s not the method or system, it’s the trader.”

So, my advice to new traders is to stop jumping from system to system, hoping to find the holy grail (which does not exist).

Instead, start learning as much as you can, then find a good system and work with it until you find success.

 

thumbnail beginner guide to trading and TA

If you would like to learn how to get started in trading, also check out: “The Beginner’s Guide to Trading & Technical Analysis”

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Spencer Li

Hindsight Bias – When People Say “I Knew It All Along!”

Described in simple terms, hindsight bias is the impulse that insists: “I knew it all along!” Once an event has elapsed, people afflicted with hindsight bias tend to perceive that the event was predictable – even if it wasn’t. This behaviour is precipitated by the fact that actual outcomes are more readily grasped by people’s minds than the infinite array of outcomes that could have but didn’t materialize.

Therefore, people tend to overestimate the accuracy of their own predictions. This is not to say, obviously, that people cannot make accurate predictions, merely that people may believe that they made an accurate prediction in hindsight.

 

Hindsight Bias

 

This affects future forecasting, because a person subject to hindsight bias assumes that the outcome he or she ultimately observes is, in fact, the only outcome that was ever possible. Thus, he or she underestimates the uncertainty preceding the event in question and underrates the outcomes that could have materialized but did not.

One detriment of hindsight bias is that it can prevent learning from mistakes. People with hindsight bias connected to another psychological bias, anchoring, find it difficult to reconstruct an unbiased state of mind, simply because it leads people to exaggerate the quality of their foresight.

When hindsight-biased traders have a winning trade, they tend to rewrite their own memories to portray the positive developments as if they were predictable. Over time, this rationale can inspire excessive risk-taking, because they believe they have superior predictive abilities.

Hindsight-biased traders also “rewrite history” when they fare poorly and block out recollections of prior, incorrect trades in order to alleviate embarrassment. This form of self-deception, in some ways similar to cognitive dissonance, prevents traders from learning from their mistakes.

What is the best solution for this?

In order to overcome hindsight bias, it is necessary, as with most biases, for the trader to understand and admit their susceptibility. One way to face the facts is to keep a trading journal, and use it to record your analysis and reasons for every trade, as well as the thought-process and emotional swings that went with the whole trade. This will be useful when you look back to the past after the event, and will prevent any disillusioned thinking.

“You didn’t know it all long; you just think you did.”

– James Montier

 

complete guide to investing and trading psychology cover

If you would like to learn more about trading psychology, also check out: “The Complete Guide to Investing & Trading Psychology”

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