An Easier Way to Become a Better Trader

We all want to become a better trader. There are many books and seminars on this subject. Most of them, if not all, are concentrating on the weakness of the human behavior: We are biased; or we are not disciplined enough.


Yes, we are biased on almost everything, religion and politics.

With regarding to stock market, the psychologist told us we have action bias, bias for stories, confirmation bias, conformity bias, sunk cost fallacy, disposition effect, empathy gap, endowment effect, hindsight bias, illusion of control, loss aversion, myopia, overconfidence, placebo effect, self-attribution bias and self-serving bias…etc. The list is very long.

Psychologists also told us these biases are so destructive in trading, thus they concluded “trading is 100% psychology”. Their books are best sellers, and they become famous trading coaches.

Reading market books by psychologists made me feel good in the past, because it helped me to find the “reasons” (really “excuses”) to my trading failures. However, I recently realized that “to be more disciplined” is just a lip service if you don’t have a method or a system you fully trusted, and I also realized that to change human tendency or human nature is a very hard.

I can do stock research in a rational, objective, and unbiased way when my money is not in the market. However, I am instantly biased and emotional when my hard earned money is at risk.

We all want to buy cheap and sell dear. That’s why we buy stock at $10, because it was $20 a few days ago. We thought it is cheap. The stock will usually become even cheaper to $5. We are afraid to buy a stock at $20, because a few weeks ago, it was only $10. After the stock ups and ups to $30 a share. We kicked ourselves. We wondered why we did not buy at $20. That’s our human nature.

Bias is our human nature; it is very hard to change that. An easier way we can change is our environment.

A Chinese saying says “It is easier to reshape a mountain or a river than a person's character.”

Image that you are given a list of stocks of big winners (for example, stocks such as GOOG, AMZN, AAPL, etc. a year ago), and you are only allowed to buy from the list. You would be a market genius.

Another Chinese saying says” Surround yourself with good people; you can become a better person.”(近朱者赤 近墨者黑 )

By the same token, I think the following is true and easier to achieve

“Surround yourself with good stocks; you would become a better trader.”

The diamondwise charts can be used to judge a stock to be a good or bad stock in objective and unbiased way, because its support and resistance lines are automatically drawn based upon the behavior of the stock. My sorting and ranking method is trying to filter out bad stock, and to prevent bad stocks from entering into my watch list.