If you’re like the average investor, you’d say it’s easy to feel overwhelmed at times by confusion in the markets — and sometimes even by fear.

But why should it have to be this way?

Investing is a noble pursuit. Generating wealth for a comfortable retirement means creating the financial freedom to live well in the golden years … while providing support to loved ones … enjoying the finer things in life … and possibly making a real difference in the world.

Those are all good things. The pursuit of good things should not be a stressed-out experience! But for too many investors, that’s exactly what it is. Their market journey is a series of obstacles and worries.

There is bad news and good news here.

First the bad news: Your greatest obstacle to investing success is … you.

And the good news: The solution to overcoming your “greatest obstacle” is within reach.

What does that mean, to say the greatest obstacle to investing success is you?

It means that when it comes to investing successfully, finding great stocks is not the hardest thing. And dealing with volatility is not the hardest thing.

The hardest thing for any investor — and this includes everyone from Warren Buffett on down — is overcoming the natural pitfalls and challenges within their own brains.

Walt Kelly, the artist who drew “Pogo,” had a caption on his most famous cartoon that read: “We have met the enemy, and he is us.”

Pogo: We Have Met the Enemy and He Is Us

That statement could have been tailor-made for investors. Your biggest challenge as an investor will be overcoming your natural behavioral shortfalls and biases — learning to do the right thing and overcoming your built-in bad behaviors in the process.

(And again, this isn’t just “you” specifically. It’s also true for me, and Warren Buffett, and everyone else.)

This really goes back to the essential mission of TradeStops. We want to help as many investors as possible find a path to comfortable retirement. (We’ve helped 25,000 so far, but that number should expand 1,000-fold.)

A key goal of TradeStops is to remove anxiety from the investment process, and in doing so, help investors rediscover the joy of investing as they build long-term wealth.

How do we do this? By combining science, technology, and proven principles of behavior modification.

To get rid of bad investing habits, you can’t conduct brain surgery on yourself (and you wouldn’t want someone else to try).

But you can use software as a tool in the investment decision-making process … which in turn serves as a form of painless behavior modification … which puts you on the path to anxiety-free investment success.

Again, this is what TradeStops is all about: Helping investors overcome their greatest obstacle to investing success … so they can meet their long-term wealth-building goals … and have a positive impact on everyone around them.

Here’s something else funny about the brain: Knowledge makes behavior modification easier.

The better and deeper the brain understands the “why” behind something, the easier it becomes to make a positive behavior change around that thing. And sometimes the “why” is even more important than the rules.

The importance of the “why” was once vividly demonstrated by Ed Seykota, a famous trend follower who made countless millions in the commodity futures markets.

Seykota was one of the earliest adopters of mechanical trend-following techniques. In the 1970s he was a pioneer in the use of exponential moving average crossover systems. (They were so new and exotic at the time, people called them “expedential” moving averages.)

At one point, Seykota decided to teach a classroom course on trend following. For the curious who signed up — remember, trend following was totally new at this point — Seykota spent something like 10 percent of the classroom time explaining the very simple rules of his trend-following system — and the other 90 percent explaining the “why” behind the importance of sticking with the rules!

We’ve realized a similar idea applies to TradeStops software.

No matter how good our software is — and you continue to give us rave reviews, for which we are deeply grateful — it feels like there is always more opportunity to help you, our customers and fellow investors, to get more out of TradeStops by better understanding the “why” behind certain basic principles.

To that end, we are excited to start something new: An “education series” of editorials, designed to help you become a better investor by sharing the “why” behind some very important concepts.

Our game plan with the education series is to start with the following concepts, exploring each one over a period of weeks or months:

  • Cognitive Biases
  • Probability
  • Investor Psychology

We’re confident the insight you gain from this series can help make you a better investor, even if you aren’t currently using TradeStops. (Though of course, if you haven’t yet experienced the power of TradeStops, we suggest rectifying that immediately!)

Another one of our goals for 2018 is to accelerate the development of TradeSmith University, our ongoing effort to enhance your education as an investor. It goes back to the same set of goals: Giving you more of the “why” behind the principles of investing … so you can make better use of the TradeStops software … in order to reach your wealth-building retirement goals.

It’s an exciting project. We’ve got some great material to draw from, and we’re confident you’ll learn a lot.

If you have any questions, comments, or just something you’ve always wanted to know about cognitive biases, probability, or investor psychology, let us know!

Richard_Signature

Richard Smith, PhD
CEO & Founder, TradeStops

Cognitive Bias Series