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Hirschhorn: Why Many Americans Aren't Great Traders

Friday, 25 Sep 2009 | 4:22 PM ET
Hirschhorn: Why Americans Aren't Great Investors
Market coach Doug Hirschhorn looks at the six reasons that prevent many Americans from becoming great traders.

Video: Market coach Doug Hirschhorn, PhD, discusses the six reasons why many Americans aren't always the brightest bulbs when it comes to trading equities.

Generally, I'm just as patriotic as the next guy. I mean, I even got married on July 4th. But when it comes right down to it, there are six reasons why Americans can be, well, dumb when it comes to investing:

1. We tend to believe the so-called experts too much If 2008 taught us any lesson, it was to be skeptical and ask lots of questions.

2. Crystal balling You try to predict what is going to happen rather than pay attention to:

  • What just happened
  • What mistakes you made
  • What lessons can be learned
  • And how you can improve

3. Reactive approach instead of proactive Rule #1 in trading is to always know where your downside risk lies. You tend to only pay attention to risk when it blows up in your face.

4. Control freak You waste time each day watching your investments and the markets because you fear that if you don’t watch it, it will betray you.

5. Immediate gratification mindset You want it now, you want it fast, and you want more of it.

6. Overconfidence You think if you take your investments into your own hands then you can outperform the markets.

Even professional traders have a difficult time doing this consistently. Remember, trading is, by far, the hardest way to make easy money.

Think better, invest smarter.

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Doug Hirschhorn is the chief executive officer of Edge Consulting, a firm specializing in “Peak Performance Coaching.” He holds a Ph.D. in Psychology with a specialization in sport psychology, and has offices in New York and South Florida. His client list includes elite athletes as well as many of the largest banks, hedge funds and financial institutions in the world. Doug is presently at work on his new book, 8 Ways to Great (Putnam, 2010).

Have a question for Doug? You can reach him through his Web site, DrDoug.com

Disclaimer: Doug Hirschhorn's expertise is in the psychology of achieving peak performance. He is not a financial advisor and does not make trading or investment recommendations or provide trading or investment advice. He is an expert on the mental game. Although Doug Hirschhorn has a Ph.D. in Psychology with a specialization in sport psychology, he is not a licensed psychologist and does not provide therapeutic, clinical or counseling services.

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