Home > Apprentice Trader Journals, Lessons from the trading floor, Psychology > The Difference Between a Bias and an Opinion

The Difference Between a Bias and an Opinion

The current market environment has been filled with opportunities, the last hour of yesterday and the last 30 minutes of Friday being the best example.  The money has been there but only to the flexible trader who is able to look at the market with an open mind.  Many traders have been frustrated that they have been missing some of these moves (myself included), and I think the reason behind it is they are looking at the market with an opinion about what it should be doing. 

When you are game planning coming into the day you should be forming a bias about what you think the market is going to do and what stocks you will trade if the market unfolds the way you planned.  Forming this gamelan will allow you to trade more size and having a higher conviction about what you are seeing.  The danger is forming this bias and being able to see nothing else in the market except for what confirms your initial bias.  This is what is called having an opinion.  When you form an opinion you are only seeing what you want to see.  With the increased volatility in this market traders who are trading with an opinion are getting crushed, and will end up being a statistic. 

When you game plan for the day you need to make sure you are planning for everything.  Plan on what you will do if the market opens 200 points down and then starts to rally.  This plan may just be to do nothing but write it down, make yourself accountable.  The important thing is to be flexible in your planning and pay attention to what is happening in the market.  If what you planned on happening is not happening reevaluate your ideas, don’t just keep trading your bias that is when it becomes an opinion.

It is human nature when you are bombarded with information to try to make sense out of it.  The key is to make sure you are looking at everything you have available and not just see what you want to see.  Best of luck for the rest of the day and happy trading.

Kyle

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