In this episode, Louise Bedford and Dr. Gizelle Willows delve into the fascinating world of cognitive biases and trading anchors.
They share examples and stories of how common anchors can influence trading decisions and discuss the tell-tale signs that traders may be held back by these anchors.
The conversation explores various biases, including overconfidence, confirmation bias, and framing bias, while offering practical tips and strategies to overcome them.
Through engaging discussions, listeners gain valuable insights into recognising and managing cognitive biases for more successful trading.
In this episode, you will learn:
- How common anchors can affect trading decisions and performance.
- The tell-tale signs of being held back by cognitive anchors.
- Practical tips and strategies to overcome cognitive biases and make more informed trading decisions.
- The importance of seeking an objective perspective and avoiding confirmation bias.
- The role of emotional attachment and sentimentality in trading.
- Louise Bedford and Dr. Gizelle Willows provide valuable insights and actionable advice to help traders recognize and manage cognitive bias.
Key Concepts We Discuss in this Episode
Stock Anchoring: Traders often anchor their decisions to the price at which they purchased a stock. Emotional attachment and sentimentality can cause traders to hold onto stocks longer than they should, even when market conditions have changed.
Identity Anchoring: Traders may identify themselves as winners and struggle to accept losses, leading to poor decision-making.
Future Anchoring: The belief that future success justifies current actions, even if those actions are not based on rational analysis.
Tell-Tale Signs of Anchoring: Signs include reluctance to sell poorly performing stocks, a focus on past performance over current market conditions, and attachment to specific trading strategies.
Tips to Overcome Anchors: Strategies for overcoming anchors include turning the chart upside down to gain a fresh perspective, using a well-defined trading plan, seeking an accountability partner, setting clear investment goals, and remaining open to change.
Cognitive Biases: Discussion of various cognitive biases, such as overconfidence, confirmation bias, and framing bias, and their impact on trading decisions.
About Dr Gizelle Willows
Dr Gizelle Willows is the host of the Nudging Financial Behaviour Podcast.
She helps the financial services industry understand and manage behavioural biases.
She says: “I am passionate about helping people understand their behaviour with money and gently nudging them to spend less and save more.
“I have a PhD and NRF-rating in behavioural finance and have several academic journal publications on investor behaviour, financial literacy and personal finance.
“As Director at Nudging Financial Behaviour, I help the financial services industry understand and manage behavioural biases. I support financial planners, financial planning practices, product providers, and other key stakeholders in the industry. I also aid understanding through live speaking events and bespoke consulting.
“As Professor at the University of Cape Town, I am actively involved and at the forefront of the latest research in personal and behavioural finance. I am convenor and lecturer on the MCom in FRAG (Financial Reporting, Analysis & Governance) and an active post-graduate research supervisor.
“As Board Trustee for the UCTRF (UCT Retirement Fund) Member on the main board, as well as the Investment and Retirement & Exit Benefits sub-committees, I advise on relevant decisions that impact the retirement savings and decisions of the members of this large retirement fund.”
To get in touch with Gizelle
LinkedIn: linkedin.com/in/gizelle-willows
Youtube: www.youtube.com/@NudgingFinancialBehaviour
Website: nudgingfinancialbehaviour.com
About Louise Bedford
Louise Bedford is a highly accomplished and experienced trader, educator, and author, with over 30 years of experience in the financial markets.
She is the co-founder of The Trading Game and is known for her unique approach to teaching trading psychology and market analysis.
Louise has authored several successful trading books, including Trading Secrets, Charting Secrets, and The Secret of Candlestick Charting. She is also a regular contributor to Ausbiz, the Your Trading Edge magazine, and is the host of the Master Your Trading Mind Hub at IG Markets Australia.
She and her business partner, Chris Tate, have been running their repeat-for-free Mentor Program for the past 23 years. They provide simple techniques that you can implement straight away, and valuable resources to enhance your trading so you can maximise your profit potential.
The Trading Game Mentor Program is a 6-month, repeat-for-free course, that has been running since the Year 2000.
If you’re curious about whether this is your next step, then you need to register for Priority Notification, so you can learn more, and get a heap of free trading resources.
To get in touch with Louise
Facebook: https://www.facebook.com/TradingGame/
Twitter: https://twitter.com/TheTradingGame
LinkedIn: https://linkedin.com/in/louise-bedford/
Youtube: https://www.youtube.com/tradinggame
Photo by Janosch Diggelmann on Unsplash
