How to unlock your trading success by measuring it

economictimes.indiatimes.com:

However, when it comes to investing in stocks, behavioral biases often override objective reasoning. This leads to irrational analysis and ultimately financial losses. Emotions and biases often cloud our judgment, leading to poor trading decisions.

For instance, when investors have an exaggerated belief in their ability to predict the market, they may take excessive risks. They may ignore warning signs such as not exiting when stop loss is hit. As the renowned saying goes, “The only competition a person has is with himself”.

This notion emphasizes the significance of self-assessment and continuous self-improvement. Each investor may exhibit unique strengths in particular market segments. The accurate identification of these trading strengths and weaknesses can only be achieved through an objective assessment.Here’s an example to explain this… Consider two investors — investors A and B — who engage in trading across different segments.

Quantifying their one-year returns across each segment reveals that Investor A generates higher returns in the F&O segment, while Investor B excels in long-term investments. Furthermore, the data suggest that both investors should refrain from option selling. In a study conducted by Barber and Odean in 2000, it was found that investors seeking short-term gains and engaging in impulsive trading often faced unfavorable outcomes.

Assessing trading performance helps investors understand their behavior and spot patterns that can negatively impact the returns. For example, if an investor realizes that impulsive trades during market volatility lead to poor results, he can adopt a more disciplined and rule-based approach. Successful traders stick to a consistent strategy, but finding the right one