If $GME and #silversqueeze have taught newbies anything this week it's this:

Trading & investing are unique in that they pit you against your own innate human nature.

There are six mental errors in particular that traders and investors are vulnerable to.

Here's a thread:

1) Regret theory:

• Emotional reaction people experience after realizing they've made an error in judgment

• Investors become emotionally affected by falling price and avoid selling as a way to avoid regret

• Some people bypass this by following the crowd (herd mentality)

2) Mental accounting:

• People think of value in relative terms rather than absolute terms

• Leads to hesitation to sell an investment that once had monstrous gains but is now leveling out

• Caused by an emotional attachment to the past.

3) Loss-aversion theory:

• Investors are more stressed by prospective losses than they are happy from equal gains

• May explain why investors hold on to losing stocks - they are avoiding the pain of the loss

• People will take more risk to avoid losses than to realize gains

4) Anchoring:

• The use of irrelevant past information as a reference for evaluating a stock

• Investors will hang on to losing investments waiting to break-even at purchased price

• They anchor the value of an investment to the value it once had hoping it will return there

5) Over/Under Reacting

• Traders & Investors will be overly optimistic when market is going up & overly pessimistic when market is going down

• Strong sentiment moves stock beyond its intrinsic value and provides opportunity for intelligent traders and investors to profit

6) Confirmation bias

• The tendency to search for, interpret & favor information that confirms one's trades or investments

E.g.

- $TSLA bulls will only seek information confirming that the company is revolutionary.
- Bears will seek out information proving it's a fraud.

The way to win this constant battle goes beyond what can be described in a thread...

but...

Sign up at the link below and I'll send you a video lesson in trading psychology absolutely free. https://senecalytics.com/analysis