today I am sharing a valuable concept which helps us trade better with efficiency. I promise your trading results will improve if you follow this.
It is the concept of decision fatigue. So, let's see what we can learn from it :
To put it simply, decision fatigue is when you get mentally tired from taking decisions. The more number/harder the decisions are, the lesser brain power you will have to take the next one which leads to poor decision making in the later stages.
Most notable example being that judges in courts have have been shown to make favourable decisions in the morning.
So, how does it matter to us traders ?
As you know, the market is so dynamic with constant fluctuation of prices which can be quite demanding on the brain.
And as we process so much data and make multiple trades, there are high chances of less than optimal performance after a point of time.
Haven't we all regretted trades where later we thought "how and why did I do that ?"
to tackle this and be in optimal capacity,
One should make most of the decisions before the market opens.
which stocks are you going to follow, what strategy you are going to use, what are the possible scenarios, what will you do when this or that happens;
basically, be fully prepared and for every contingency, keep a plan.
So, when the market opens and you are doing live trading,
you don't have to be a juggler and handle so many decisions.
Then, you will have to only follow your plan and make much lesser number of decisions leading to better quality.
If you want to take it too far, then like Jobs and Zuckerberg, you can pre-decide your clothes, breakfast, etc previous night; so that you can go to extreme levels of optimal performance by using all your brain power in only the most important decisions.
I'd leave you with one of my favourite quotes :
" The more you sweat in peace, the less you bleed in war. "
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