Wednesday, 24 November 2010

A Win Is What You Make It

For someone who a few hours earlier had dropped four figures on a basketball game, I felt remarkably chipper yesterday. It's not from some deep-rooted psychological desire to lose, but simply because I made about half of the loss back in the next game I traded, and finishing a session on a high, even with an overall loss, almost seems preferable to finishing up overall but finishing with a big loss. It's human nature to put a greater emphasis on the most recent experience, and studies have been done to prove this.

From the American Psychological Association:

The effect of life events on subjective well-being (SWB) was explored in a 2-year longitudinal study of 115 participants. It was found that only life events during the previous 3 months influenced life satisfaction and positive and negative affect. Although recent life events influenced SWB even when personality at Time 1 was controlled, distal life events did not correlate with SWB. SWB and life events both showed a substantial degree of temporal stability. It was also found that good and bad life events tend to co-vary, both between individuals and across periods of the lives of individuals.

Also, when events of the opposite valence were controlled, events correlated more strongly with SWB. The counterintuitive finding that good and bad events co-occur suggests an exciting avenue for explorations of the structure of life events.
One exciting avenue for me is trading, and when it comes to trading, it pays to have a short memory. In the second game, while the balance of my mind could be said to have been 'disturbed', a value opportunity presented itself, yet I found myself hesitating, solely due to the negative outcome I'd experienced in the fist game. Ultimately I 'forced' myself to enter the market, and as happens more often than not, it paid off. The point I am trying to make is that one needs to look at the big picture, rather than just recent events when it comes to trading and gambling. It's the nature of the game that winners and losers do not come evenly spaced.

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