{"id":34390,"date":"2013-12-09T09:21:45","date_gmt":"2013-12-09T14:21:45","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=34390"},"modified":"2014-01-12T10:12:28","modified_gmt":"2014-01-12T15:12:28","slug":"enhancing-trader-performance-with-daniel-kahneman","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/enhancing-trader-performance-with-daniel-kahneman","title":{"rendered":"Enhancing Trader Performance with Daniel Kahneman"},"content":{"rendered":"<div style=\"font-size: 16px;\">\n<p><em>*****David Blair, The Crosshairs Trader, is a blogger\/trader\/educator who does a wonderful job of sharing research on elite performance and how it relates to trading. Below is his latest post for the SMB trading community.***** \u2014 Editor\u2019s Note<\/em><\/p>\n<p>Traders who study disciplines outside of technical analysis have a distinct advantage over those who do not. Knowing why we think better helps us when we think about our trading process. It also better helps us accept any number of possible outcomes based on those decisions. <a href=\"http:\/\/en.wikipedia.org\/wiki\/Daniel_Kahneman\">Daniel Kahneman<\/a>, the man behind the recent bestseller <a href=\"http:\/\/www.amazon.com\/Thinking-Fast-Slow-Daniel-Kahneman\/dp\/0374533555\"><em>Thinking Fast and Slow<\/em><\/a>, has been researching and writing about the thinking process for decades. It would be wise for us to appreciate and apply his studies to our decision-making processes both in and outside the charts. The following provides a few good places to start, as Kahneman\u2019s contributions are too numerous to list here.<\/p>\n<p>\u201cWhen people face an uncertain situation, they don\u2019t carefully evaluate the information or look up relevant statistics.\u201d (<a href=\"http:\/\/www.newyorker.com\/online\/blogs\/frontal-cortex\/2012\/06\/daniel-kahneman-bias-studies.html\"><em>The New Yorker<\/em><\/a>)<\/p>\n<p>\u201cThe main problem was that we failed to allow for what Donald Rumsfeld famously called &#8216;unknown unknowns.&#8217;\u201d (<a href=\"http:\/\/www.mckinsey.com\/insights\/strategy\/daniel_kahneman_beware_the_inside_view\">McKinsey &amp; Company<\/a>)<\/p>\n<p>\u201cWe use fast, intuitive thinking\u2014System 1 thinking\u2014whenever possible, and switch over to more deliberate and effortful System 2 thinking only when we truly recognize that the problem at hand isn\u2019t an easy one.\u201d (<a href=\"http:\/\/www.bloomberg.com\/news\/2011-10-24\/bias-blindness-and-how-we-truly-think-part-1-daniel-kahneman.html\">Bloomberg<\/a>)<\/p>\n<p>\u201cPeople underweight outcomes that are merely probable in comparison with outcomes that are obtained with certainty.\u201d (<a href=\"http:\/\/www.hss.caltech.edu\/~camerer\/Ec101\/ProspectTheory.pdf\">Kahneman\u2019s Landmark Paper on Prospect Theory<\/a>)<\/p>\n<p>\u201cHow do people assess the probability of an uncertain event or the value of an uncertain quantity?\u201d (<a href=\"http:\/\/www.hss.caltech.edu\/~camerer\/Ec101\/JudgementUncertainty.pdf\">Kahneman and Tversky on Judgment Under Uncertainty<\/a>)<\/p>\n<p>\u201cRisky choices, such as whether or not to take an umbrella and whether or not to go to war, are made without advance knowledge of their consequences.\u201d (<a href=\"http:\/\/web.missouri.edu\/~segerti\/capstone\/choicesvalues.pdf\">Missouri Education<\/a>)<\/p>\n<p>\u201cI was not the rational, sensible investor that I&#8217;d always thought I was.\u201d (<a href=\"http:\/\/money.cnn.com\/magazines\/moneymag\/moneymag_archive\/2001\/05\/01\/301274\/\">CNN Money<\/a>)<\/p>\n<p>\u201cThat your mobile phone allows you to trade options between innings is not relevant despite the advertising you may see on television.\u201d (<a href=\"http:\/\/25iq.com\/2013\/07\/18\/a-dozen-things-ive-learned-about-investing-from-daniel-kahneman\/\">25iq<\/a>)<\/p>\n<p>\u201cKahneman&#8217;s research has shown that since we use overconfident, highly emotional logic in making investment decisions, the best approach is often the simplest.\u201d (<a href=\"http:\/\/www.bloomberg.com\/apps\/news?pid=newsarchive&amp;sid=aLQ.sf4uR_S8\">Bloomberg<\/a>)<\/p>\n<p>\u201cThe story was always the same: our ability to predict performance at the school was negligible. Our forecasts were not much better than blind guesses.\u201d (<a href=\"http:\/\/www.nepistemology.com\/sites\/default\/files\/kahneman.pdf\">Nepistemology<\/a>)<\/p>\n<p>\u201cAccording to Kahneman, the investing industry has been built on an \u2018illusion of skill,\u2019 or the belief that one person has better information than the other person.\u201d (<a href=\"http:\/\/investingcaffeine.com\/2012\/09\/09\/decision-making-on-freeways-and-in-parking-lots\/\">Investing Caffeine<\/a>)<\/p>\n<p><b>David Blair<\/b><\/p>\n<p><b>THE CROSSHAIRS TRADER<br \/>\n<\/b><a href=\"http:\/\/www.thecrosshairstrader.com\/\" target=\"_blank\">www.thecrosshairstrader.com<\/a><br \/>\n<a href=\"http:\/\/www.thecrosshairstrader.com\/crosshairs-blog\/\" target=\"_blank\">http:\/\/www.<wbr \/>thecrosshairstrader.com\/<wbr \/>crosshairs-blog\/<\/a><\/p>\n<p>Related blog posts:<br \/>\nT<a href=\"http:\/\/www.smbtraining.com\/blog\/the-eight-principles-of-elite-traders\">he Eight Principles of Elite Traders<\/a><br \/>\n<a href=\"http:\/\/www.smbtraining.com\/blog\/enhancing-performance-with-bias-awareness\">Enhancing Performance with Bias Awareness<\/a><\/p>\n<p>No relevant positions<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>*****David Blair, The Crosshairs Trader, is a blogger\/trader\/educator who does a wonderful job of sharing research on elite performance and how it relates to trading. Below is his latest post for the SMB trading community.***** \u2014 Editor\u2019s Note Traders who study disciplines outside of technical analysis have a distinct advantage over those who do not. Knowing why we think better &#8230; <a href=\"https:\/\/www.smbtraining.com\/blog\/enhancing-trader-performance-with-daniel-kahneman\" class=\"more-link\">Read More<\/a><\/p>\n","protected":false},"author":1042,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1935,1,455],"tags":[3617,4692,1332,1837],"class_list":["post-34390","post","type-post","status-publish","format-standard","hentry","category-david-blair","category-general-comments-2","category-trading_psychology","tag-daniel-kahneman","tag-elite-performance","tag-technical-analysis","tag-trader-performance","no-post-thumbnail"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.1.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Enhancing Trader Performance with Daniel Kahneman | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/enhancing-trader-performance-with-daniel-kahneman\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Enhancing Trader Performance with Daniel Kahneman | SMB Training\" \/>\n<meta property=\"og:description\" content=\"*****David Blair, The Crosshairs Trader, is a blogger\/trader\/educator who does a wonderful job of sharing research on elite performance and how it relates to trading. 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Read More\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.smbtraining.com\/blog\/enhancing-trader-performance-with-daniel-kahneman\" \/>\n<meta property=\"og:site_name\" content=\"SMB Training Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/smbcap\/\" \/>\n<meta property=\"article:published_time\" content=\"2013-12-09T14:21:45+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2014-01-12T15:12:28+00:00\" \/>\n<meta name=\"author\" content=\"David Blair\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:site\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"David Blair\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" 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