Cognitive Perspective: Think Differently For Better Results

Cognitive Perspective Collection The Pensive Nugget


What you believe shapes your perception of the world;
Your perception of the world determines how you think about it;
How you think about it determines the paths you choose to take.

In this way, everything we do, and everything we don’t do, is distilled from our thoughts. Understanding this is simultaneously liberating and empowering.

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Why Traders Need To Focus on Asymmetric Returns 1

I can calculate the motion of heavenly bodies, but not the madness of people, Sir Isaac Newton Quote

Hang around traders or investors long enough and you will hear the phrase “asymmetric returns”.

While it sounds suspiciously sophisticated and impressive, “asymmetric returns” aren’t, like a lot of other financial jargon, pure marketing guff. They are, in fact, a reflection of not just how markets distribute outcomes (returns), but also how we can best profit from them. 

Which begs the question, what exactly are asymmetric returns, and why are they so important?

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15 Cognitive Biases Traders Must Know To Be Successful

Cognitive biases can negatively affect our decision making, especially when it comes to trading and investing

Cognitive biases are insidious. As a matter of fact, they are probably affecting your trading profitability right now.

Here is a quick summary of the ones you must be aware of.

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Do You Think Like A Zebra In Markets?

The problems posed by the Narrative Bias are exacerbated by our human tendency to go emotionally “all in” on something – we either fully like it, or fully dislike it.

This is known as the halo effect, and leads to black and white thinking that can be counterproductive to traders.

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Are You A Victim Of Overly Simple Narratives?

Cognitive biases can negatively affect our decision making, especially when it comes to trading and investing

Humans have an innate need for explanations. In our minds, every effect must have a cause, and we naturally seek out reasons for events that occur.

This is part of a broader narrative bias, and while useful in simple scenarios, it can be dangerous when applied to complex systems like financial markets.

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Why Successful Traders Cannot Afford To Be Too Optimistic

Beware the optimism bias when trading and investing

Do you believe that negative outcomes are somehow less likely to happen to you? Because most people do.

They believe that they are likely to live longer than the average person, less likely to get divorced, less likely to get into a traffic accident, etc.

But, not everyone can consistently be above average, and traders who like to think that they are quickly find out otherwise – often in very painful ways.

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Get a different perspective on all things trading & investing every week!

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Get a different perspective on all things trading & investing every week!