When you hear a phrase like "best year ever," "best run ever," "this has never happened to me before," or something along those lines, understand it is most likely an outlier. The opposite is true as well with losing streaks and worst runs.
I know my streak is going to come to an end, likely a crashing halt, and that will put me closer to historical averages in terms of success vs. failure, profit vs. loss, and excitement/happiness vs. annoyance/disgust.
I realize it may be odd to slap a big red sign flashing the word WARNING on your forehead, but it's also reality. You never want to tell people to consider fading you, but I figure if it increases your odds of success, then at least it offers some benefits.
At some point in the near future, I will fall victim to the will of the market, its sirens call of reversion to the mean. I know it. You should know it too. After all, if you can't become self-aware as a trader, you'll likely be short for the trading world.
- Do Not Fall Into the Trap of the Hot-Hand Fallacy, by Timothy Collins, RealMoney.com, February 7, 2020.
About the author:
Zhang Xin is Trainer at chinadaily.com.cn. He has been with China Daily since 1988, when he graduated from Beijing Foreign Studies University. Write him at: zhangxin@chinadaily.com.cn, or raise a question for potential use in a future column.
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