Potential and curse

Human beings are drawn to potential. This happens in love, people, sports, lotteries and markets. We are drawn to what could have been more than what actually is. The grass is always greener on the other side, right? Not always, it is just different, it is where we could be.

The brains’ default it is set to remembering the potential of a trade. You have to work really hard to see what is actually available.  Keeping that default setting can lead to taking more risks and increases the chance of losing the lesson. The gap between potential and results is much larger than we estimate. Potential is what drives us to take a trade but not always in a good way. Removing or being aware of the emotions related to potential is necessary to see what is actually there.

In the short term, potential is psychologically rewarding. It is just a loan, we have to pay it back. Be honest with yourself and be careful to not overvalue potential.

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One Response to Potential and curse

  1. […] This originally appeared in September 2010. […]

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