Spencer Li

The Synapse Program Q2 2012 – Pioneer Batch!

A warm welcome to the new members of our community!

Over the past weekend, you have learnt the tools of price action, volume and psychology, as well as a variety of setups for different market conditions. We hope everyone has gained insights and knowledge to take your trading to the next level.

Based on the feedback we got, we will be making minor modifications to the program structure to improve the flow, and will be adding in more practical sessions and chart examples in the Synapse Workbook.

Pioneer Batch

 

Pioneer Batch 2

 

Pioneer Batch 3

 

This weekend marks the start of your trading journey. Hence, we urge all new traders to participate actively in the forum to improve their skills, and at the same time benefit by helping one another.

Feedback

“Very satisfied. Definitely improve my knowledge on price action and decision-making.”
– Alvin Lim

“Syllabus is good and easy for beginners to follow. Trainer Spencer is young but very knowledgeable and experienced in price action analysis.”
– Mr. Ang

“The techniques taught are very flexible and can work for all markets, like stocks, forex, etc. I am very impressed.”
– Justin Cheong

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

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Spencer Li

Loss Aversion Bias – Why a Loss Has Twice the Psychological Impact

trading loss

Loss aversion bias was developed by Daniel Kahneman and Amos Tversky in 1979 as part of the original prospect theory. Basically, it suggests that psychologically, the possibility of a loss is on average twice as powerful a motivator as the possibility of making a gain of equal magnitude.

In short, it suggests that people woud prefer to avoid a loss to realizing a gain.

Loss Aversion Bias

Loss aversion can prevent people from cutting losing trades, even when they see no prospect of a turnaround. Some industry veterans have coined a diagnosis of “get-even-itis” to describe this widespread affliction, whereby a person waits too long for a trade to rebound instead of cutting their losses. This is dangerous because the best response to a loss is to cut it fast and move on to a better trade.

Similarly, loss aversion bias can make traders dwell excessively on risk avoidance when evaluating possible gains, since dodging a loss is a more urgent concern than seeking a profit. When their trades start to show a profit, loss-averse traders hasten to lock in profits, fearing that, the market might reverse itself and rescind their profits.

The problem here is that exiting too early to protect gains severely limits upside potential. This prevents traders from catching the big moves.

What is the best solution for this?

This is where the importance of the stoploss comes in. If a trader is disciplined, and has a preset stoploss point, the trader will exit a losing trade once the stoploss point is breached. This removes any blind hope of a rebound, and by squaring off positions, it puts the trader in a neutral frame of mind to enter the next trade, and at the same time frees up the capital for it.

“Win as though you were used it to, lose as if you enjoyed it for a change.” – Ralph Waldo Emerson

 

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

Private Trading Workshop | Guest Speaker at STATS (Singapore Technical Analysts & Traders Society)

Today, we were invited to give an exclusive seminar to the members of STATS (Singapore Technical Analysts & Traders Society), where we shared our prototype of the Trader Blueprint. With a focus on price action and psychology, we shared how to nurture a new trader into a professional via our blueprint for success.

This included 7 important attributes starting with the letter “M”, which are all required to become an excellent trader.

  1. Masterplan
  2. Market
  3. Method
  4. Money
  5. Mindset
  6. Mastery
  7. Mentoring

Guest Speaker at STATS

Many people spend their whole lives searching for the holy grail of trading, but fail to realise that the method is merely one of the 7 M’s. That is why we created an all-rounded program to focus not just on a proven methodology, but also include the other aspects of trading.

Stay tuned for our upcoming seminars!

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

Confirmation Bias – I See Only What I Want to See!

Confirmation bias refers to a type of selective perception that emphasizes ideas that confirm our beliefs, while devaluing whatever contradicts our beliefs. This can be thought of as a form of selection bias in collecting evidence to support certain chosen beliefs.

For example, you may believe that more red cars drive by your house during the summer than during any other time of the year; however, this belief may be due to confirmation bias, which causes you to simply notice more red cars during summer, while overlooking them during other months. This tendency, over time, unjustifiably strengthens your belief regarding the summertime concentration of red cars.

 

Confirmation Bias

 

To describe this phenomenon another way, we might say that confirmation bias refers to our all-too-natural ability to convince ourselves of whatever it is that we want to believe. We attach undue emphasis to events that corroborate the outcomes we desire and downplay whatever contrary evidence arises.

For traders, this is dangerous because traders who are entrenched in their opinion will only actively seek out information that confirms their opinion, while ignoring those that do not. This is especially true for traders who rely heavily on indicators, since many indicators will give conflicting signals, and it is not hard for a trader to find those indicators which support a chosen viewpoint.

Another hazard comes in the form of marketing gimmicks and market gurus, who like to make a lot of (absurd) forecasts based on their “sure-win” trading method or system. To newbie traders, they may appear to have a very high success rate, mostly because people want to believe the guru, hence they will celebrate his successful predictions while ignoring his less-accurate (or completely off) forecasts.

What is the best solution for this?

Once again, objectivity is necessary to see both sides of the coin, and the best way if you want to test if a method works is to record every signal (whether it is a gain or loss), and not just record those instances where it worked, while ignoring those times when it did not.

“It is the peculiar and perpetual error of the human understanding to be more moved and excited by affirmatives then by negatives.”

– Francis Bacon

 

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

Endowment Bias – Do You Really “Own” a Trading Position?

People who exhibit endowment bias value an asset more when they own it, as compared to when they don’t. This is inconsistent with standard economic theory, which asserts that a person’s willingness to pay for a good should always equal the person’s willingness to accept disposition of the good.

 

Endowment Bias

 

In essence, this bias is a mental process in which a differential weight is placed on the value of an object. That value depends on whether one possesses the object and is faced with its loss or whether one does not possess the object and has the potential to gain it.

If one loses an object that is part of one’s endowment (ownership), then the magnitude of this loss is perceived to be greater than the magnitude of the corresponding gain if the object is newly added to one’s endowment.

For example, this bias influences traders to hold onto losing positions because they feel that they “own” the position, and are reluctant to close it and enter a better position instead, although the potential gains are higher. This is often the result of decision paralysis, which places an irrational premium on the compensation price demanded in exchange for the disposal of the endowed asset.

What is the best solution for this?

One way to break free from flawed thinking is to ask yourself, “if you did not have any positions at the moment, would you still choose to take the same position which you are currently holding?” If you answered no, then you might want to reflect on why you are still holding onto it.

“A wise man should have money in his head, but not his heart.”

– Jonathan Swift

 

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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