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Fusion Analysis by V. John Palicka

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6INVESTING, TRADING, AND GOLD

Individual traders often cannot make a good record in trading, and so are at a disadvantage to institutional traders.1

Some key differences are behavioral. Well documented is the Disposition Effect where winners are sold too soon and losers are held too long. Amateurs hate to admit they are wrong and will more likely hold on to losing positions on the hope they bounce back. Usually, new traders exhibit overconfidence. They also trade too much and generate excessive transaction costs.

There are other traits that can challenge amateur traders. There tends to be limited attention to stocks in general, while stocks that received recommendations from news or finance programs gained volume and new highs. This ultimately ...

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