My aunt Ookie called and told me she had a great strategy for businesses who wanted to get on Twitter.
I am kidding of course but it does seem like everyone is chiming in with what businesses should be or need to be doing to enhance their public relations or customer service or to gain followers or get their message out or whatever.
The truth is all organizations are distinct and so they have different needs and goals and must approach the medium differently. There are an infinite number of variables which will demand an infinite number of strategies. The size of the business, the product for sale, the customer base, the stage of the company, the revenue model, the brand image etc.
So I can not provide one golden post which defines what all businesses should or should not be doing. No one can because it will always be different.
What I can do though is identify a critical common factor. That is, one quality which cuts across all company specific variables, all goals and all strategies.
And that is to
Just Be Awesome.
You want to be awesome by generously providing the best information in a way that is captivating and to do so consistently over time.
It doesn’t matter what you are selling, if you have an area of expertise then share it and then keep on sharing it. If you can’t communicate effectively then find someone in the organization who can.
Twitter provides the potential to impart information with a global audience for every vertical no matter how narrow and as a result organically promotes meritocracy.
Just being awesome will bring you credibility and trust and everyone who is interested in your field from customers to potential customers to journalists to prospective employees will become aware of your awesomeness and seek you out over the long run.
You will build brand.
Here is the link to the SIIA Panel discussion I pariticipated in moderated by @graubart with @harrisj, @pop17 on “Why Twitter Matters.
This was a great bunch and a lot of fun.
A while back I wrote a post about how Twitter had created an
optimal relational field, fertile soil upon which others might grow vertical communities by adding a bit more structure.
By promoting an intuitive fairness, clarity in relationship dynamics and balance between control and freedom, it has managed to get the next phase of global connectedness just about right.
Since then, I have indeed observed not only the broad Twitter community continue to grow rapidly but the velocity of new communities sprouting on this field accelerate.
Now I would like to take a moment to focus on the other side of this equation and to discuss how these new communities might want to position themselves at least initially. If you are building social applications atop Twitter this might serve as some guidance…
Keep first iteration extremely simple and flexible. This trumps more features by a long shot.
Twitter is becoming huge by keeping their platform simple and flexible and the fierce loyalty of the community even in the face of the fail whale is a testament to this fact.
And, while many social media experts continue to flaw Twitter for not adding this bell or that whistle, new users keep showing up and old users keep coming back.
The people get it.
They have come to rightly adore and crave this simplicity so you can add features later once you have a viral product.
People are social and they want to connect on a field that provides structure but not too much structure, freedom but not chaos and clear and fair relational rules.
Define crisply a narrow service or vertical and do little more than make that one thing awesome and you will thrive by unobtrusively fostering communication and connection to your user’s delight.
In previous posts, I’ve begun introducing the cognitive theory of noise (CTN), a comprehensive model of market participant experience which will include a prescriptive component that will help traders decrease irrational behaviors and improve profitability.
This is a big project and there will be many more posts that are theoretical in nature. But in this post I would like to skip ahead a bit and offer a prescriptive technique that traders can implement on their own which will promote taking losses quickly.
I have had the opportunity to talk with a number of very successful traders over the years and have found that even while their trading styles and asset classes of choice differ, they all tend to share a few common attributes which separate them from less successful traders and which I believe contribute to a significant portion of their profitability.
In addition, I have traded equities profitably for a number of years myself and have applied certain rational behaviors to my own routine that have served me well.
Getevenitis
One in particular stands out as crucial and so I will begin there. Every winning trader that I know habitually takes losses quickly before they become outsized.
While taking small losses may seem like a simple matter of discipline, there are a number of reasons why this is not the case. I have written about it already here and here but to summarize briefly, holding a losing position tends to spur a set of psychological processes which interrupt the rational choice of realizing the loss.
Once the trader is holding a loser, anxiety increases which spurs the avoidance of loss realization.
Next, the trader will tend to begin rationalizing the position and the loss avoidant behavior with automatic internal statement such as, “this has to come back” or “if I can just get even.”
There are five basic components at play here. These are:
Situational - The trader is in a losing trade
Behavioral - The trader is avoiding loss realization by holding the loser and not selling rationally while the loss is small.
Affective - The trader is experiencing anxiety which increases as the loss increases.
Cognitive - The trader has begun rationalizing the loss with automatic internal statements.
Neuropsychological - The anxiety is accompanied by chemical changes in the central nervous system.
Taken together, these five components form a CTN profile for the disposition effect within the domain of losses or what Shefrin and Statman have also called getevenitis. (I will be writing much more about CTN profiles in upcoming posts)
If you have the tendency to fall into this pattern, you are not alone. It is the normal reaction and a empirically based evidence suggests that the majority of humans in such a situation will tend to respond similarly.
The Clinical Psychological Correlate to Getevenitis
The getevenitis profile I have outlined above is similar in some ways to certain anxiety disorders which result in behavior avoidance. These include simple phobias as well as agoraphobia.
Take for example those who suffer from an intense and irrational fear of bridges, gephyrophobia. They might have a 5 component profile which looks like this:
Situational - The bridge phobic is faced with the thought or prospect of crossing a bridge.
Behavioral - The bridge phobic avoids bridges similar to the way the trader avoids taking the loss.
Affective - The bridge phobic is experiencing anxiety which increases as the bridge approaches.
Cognitive - The bridge phobic rationalizes the fear with automatic internal statements such as, “that bridge might fall while I am on it and I will be killed” and/or “I remember seeing the bridge in Minnesota fall and this one is probably also faulty.”
Neuropsychological - The anxiety is accompanied by chemical changes in the central nervous system.
The treatment might also be similar. Clinical psychologists successfully utilize a treatment for phobics who avoid situations called graded exposure. In exposure, the phobic is guided through a series of exercises in which the exposure to the irrationally feared stimulus is gradually increased until the client is able to approach instead of avoid the it.
Self-Directed Exposure Program for Getevenitis
I will now describe a program that traders can use which might be effective in extinguishing the irrational behavior of holding losses too long.
The rationale here is that if you expose yourself to the action of taking losses quickly, then over the course of the program you will gain the capacity to cut losses fast while you are trading. You will train yourself to make it automatic.
Step One: Imaginal Exposure: Find a quiet and comfortable place and close your eyes. Then, imagine that you are at the screens during the trading day and that you have entered a trade that begins to go against you. Make sure that you take your time during this exercise and visualize every small detail that you can, the ticker, the price of entry, the number of shares, the movement of the stock against you and the feeling you get as this occurs. Then, imagine closing the trade for a small loss quickly.
Repeat this process twice total.
Step Two: Tiny Trade Tiny Loss - Now that you have imagined yourself taking a loss quickly, you will move on to making a set of very small trades and setting very tight stops. Ideally, you will be using a system that charges you by the share rather than by the trade and if you are not you might want to contact your executing broker to see if this is feasible.
Next, pick a stock that you trade and know well and buy a very small increment 1/10 to 1/20 of your normal scale size and buy it. Do not concern yourself with the set up or whether this is a good trade or not. Set an extremely tight mental stop of 10 cents below your entry and a prfit goal of 25 cents.
Then, close the trade down a dime or up .25.
Repeat this several times until taking the loss is almost automatic and extremely easy to do.
Then, repeat it again!
You might be surprised that even though you are not setting the trade, your p/l is not bad. This is because taking small losses quickly is in and of itself rational and limits downside while allowing upside.
Step Three: Repeat Step Two but increase your trade size by 2x. Make sure that before you move on, you are extremely comfortable with taking the small loss and have done so several times.
Step Four: Repeat Step Three but increase your trade size by 2x. Make sure that before you move on, you are extremely comfortable with taking the small loss and have done so several times.
Step Five: Repeat Step One.
Conclusion
You have now gone a long way to training yourself to take losses quickly.
This may take several days to perform the program. Return to your normal trading regiment. You will be well on your way to automatizing the behavior of taking losses quickly and of incorporating it into your routine of trading behaviors which come naturally and with less difficulty than before you started the program.
Every Winter, we come down here to South Florida to gather in and around my parents house in Del Ray with my siblings and their families who are scattered around the country.
Since arriving Thursday afternoon, I’ve sniffed about a bit and even made a few calls inquiring about residential properties specifically in Boca and Miami. Here is my initial impression…
The market is upside down, fubar, but this is no longer news to anyone. The brokers have stopped pretending that all is well which they tend to do during the initial phases of a collapse and have adapted.
Even before asking they offer stories detailing the devastation but then highlighting how well they’ve anticipated and how nimble they have been during the decline. These guys are revisionists just like the false stock market gurus I wrote about last week…
You see it as well in those free rags they publish and distribute on the sidewalk in towns such as Del Ray Beach and Boca Raton. The smarter brokers have simply incorporated the buzz words and framed their marketing in accordance with the environment.
The players have fully attenuated to the clusterfuck.
This seems like a positive sign to me and I’m thinking low ball bids for condos with great views are in order right here and right now…
