What is cognitive bias that causes investment failure? Part 1

Well, now on to the investment world”cognitive biasI'm going to write a story about”.

I was writing something and it made me sad (laughs)

However, if you have some investment experience, you are probably worried and suffering in the same way.Even people who succeed in investing always fail at first, and the results after overcoming itI wonder what it is.

The investment is not AI or computers, after allLeft and right due to human greedIt was done, and thatCreated by the human brainI will do it. So, brain habits,cognitive biasIf you know about it, I think you can get closer to success by investing even a little bit.

Previously, I wrote that “successful methods and tactics” of famous investors cannot be easily reproduced or imitated, but avoiding “methods where our ancestors failed” is reproducible.If “failure due to cognitive bias” created by the human brain can be avoided, the closer we are to a successful investment。

So, I'd like to break it down into a few steps from here on out.

What is the easiest to understand anchoring effect in investment
・The stock price, which was 1000 yen, dropped to 920 yen, so I bought it, but it fell further to 850 yen. But I thought it would go back up to 1000 yen, and when I had it, I split 800 yen... I can't cut my losses anymore... salted it.

this pattern.

If you can't cut losses, you can't definitely win in investingHowever, speaking of why losses cannot be cut mechanicallyThe feeling of “I don't want to lose”and thisanchoring effectIt is due to incidentally“I don't want to lose” is the prospect theoryIt's called cognitive bias, so actuallyPeople can't cut losses with the combination of two important cognitive biasesThat's it.

Assuming that the prospect theory will also be discussed later, let's start with this anchoring effect.
I've already seen it, learned about it, felt it as an unintended benefit... I can't forget things, and furthermore, I think “XXX yen would have been a plus if I had made a profit over there,”Always “feeling like I lost” and “feeling like I wasn't able to fight well”It comes with it.

At this point, I'm not sure about my own investment tactics, and yet another tacticSearch for tactics that can secure profit at the best placeIt's going to happen.

The opposite pattern is “buy when it goes down,” right?

As a result, it became a meaningless raccoon without being able to buy endlessly, saying “the stock price went up,” “even though I had my eye on it,” and “the screening wasn't bad.” This type won't win for the rest of their lives either. I remember the low price, and I don't notice that trends or conditions have changed, and I don't have the ability to notice, so it's a sensory/sense of affordability trade.

Waiting for an push, no push...

These are phenomena explained in Japanese as so-called “remembering high prices” and “remembering low prices.”
This is called the anchoring effect.

The reason I properly consider the chart is that I have held it without knowing itTo objectively counteract the anchoring effectThat's why we do it. As I've written before, I don't use a chart to predict the market price, but I use it to objectively capture the correct market price feeling and then follow it after the market price has moved.

If the anchoring effect dispels the wrong image and movesBuy it if it's expensive, sell it even if it's cheapIt's used to execute, isn't it?

Another important anchoring is being pulled too much by past data.

The experts who were unable to predict stock price increases in 2023 and 2024 were all people who tried to predict the future from past data and failed.
・Will the United States fall into recession in 2023
・In 2024, the interest rate difference between Japan and the US will shrink and the yen will appreciate, to around 135 yen
・Semiconductors and AI are more bubbles than that when viewed from past tech bubbles

Experts who took on the challenge with old-fashioned methods and know-how removed past data due to anchoring effects and market prices not moving according to history. I also thought the US would have a recession in 2023 from the US unemployment rate trend, reverse yield, and recession probability data, so I left it out.

This does not mean that looking at past data is meaningless, but on the other hand, it is humans who unknowingly become trapped by past data, successful experiences, know-how, and common sense due to anchoring effects.

On the other hand, it can also be said that people who break it in a well-balanced manner and risk trials that are different from past common sense and data when necessary can become successful people. You mean you can't become a successful person just by explaining and tracing past data and common sense...

FirstRemember “anchoring” as a human habit you should be aware of as an individual investorI think that would be nice.
andStudy charts to grasp optimal points so as not to make investment decisions with a wrong senseI'll do it.
results,Even if a sign that is different from your own sense of market price comes out, follow it and quietly follow the rules。

This isBest way to avoid losses due to anchoring effectsIt is.

Even if it's not a winning tactic, tactics that make it difficult to lose, and avoid one failure that makes you lose... are important.

incidentally, endured while carrying the explosion, and luckily settled the settlement where the uncovered loss disappeared, thank goodness --... is also a strong anchoring.
thisThe experience of being saved became a feeling of “if you endure the next time, you will be rewarded,” and the next one is an explosion and deathI will.

results,You have to do LC properly and early and anchor “I did LC, so I'm mildly ill” and “I was able to get it back with the next sign.”I mean, that's it.