copyright FT Weekend Magazine
intro
Just read an article by Tim Harford in the FT magazine titled "The odds are you won't know when to quit". You can read it here.
He talks a lot about "loss aversion" which I had always thought lead to a lack of participation in order to avoid losing, think I got that from a Curtis Faith book. Where as Harford says "it can lead us to cling on pig headedly to bad decisions because we hate to stop playing when we're behind". Meaning we actually hang on to loss, he states the TV show Deal or No Deal as a good example.
my trading worries
The article struck a chord with me, not due to the outcome of individual trades but more to do with trading as a profession. I often think "when if ever is trading as a career going to happen for me? And how am I going to know if I should throw the towel in?"
Harford saw 3 options.
options
1. "look resolutely away from sunk costs and towards future prospects". I feel this is verging on gambler's hope.
2. "persevere flexibly rather than stubborn", which he likens to having to choose between 2 evils.
and his favourite...
3. "view decisions as experiments... viewing a decision as an experiment gives a useful perspective because experiments are always designed to teach us something. We can keep asking: what have I learnt? And am I still learning? If a new project or activity keeps teaching us new things, it is probably worth continuing - even if the lessons are sometimes painful". I see his point and will be working "what have I learnt" into my Strategic Business Plan as a guide to whether I should be persisting in these endeavours.
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