Investors’ hate being wrong, so they’ll hold on to losing positions and get caught in a loss trap. They will favor information that supports what they already believe, even when new information proves it wrong. If you spend time reading about the market, you may notice you are mostly looking for evidence that supports what you already believe rather than data that may cause you to stop and reverse.
Skilled and experienced investment managers eventually figure out that the challenge isn’t the market- it’s us. We create our results, not the market.
When we realize that mistakes are biases and illusions, not being wrong on a position and taking a loss to keep them small, that’s what creates an edge.
Trang Ho of Investor’s Business Daily wrote an outstanding article worth reading on the subject. It’s about self-sabotage: Stock Market Traps: 5 Ways Your Brain Can Sabotage Your Investing