Have you ever noticed that you tend to listen keenly to some analysts on the business channels on televisions whereas your mind switches off while others are speaking. A close scrutiny will show that the analysts whom you follow closely will hold ideas similar to your own. If you are a bull, then you will listen to all the analysts who predict a never-ending bull-market and turn a deaf ear to those who disagree.
This is a form of selective listening that is employed by most traders. A selective listener is one who hears another but selects not to hear what is being said, either by choice or desire to hear some other message. Traders very often fall prey to this habit. They mentally block the opinions and analysis that goes against their own.
Though all of us start with the noble intention of imbibing as much information as possible relating to the market, company, industry, product et al, it has often been observed that the nature of the open position that we hold sifts the information and only that which supports our decision is accepted by the mind.
Traders who are holding short positions in Nifty will gravitate towards the analysts who are predicting a fall in the market. Those going long on Reliance Industries will devour all the positive news pertaining to the company while pooh-poohing negative news.
This tendency gets aggravated when traders are hanging on to loss making positions and are seeing the loss increasing every day. Instead of facing the situation and cutting the loss short, they will look around for opinions that support their holding on to the position even if it is a futile exercise.
The first step towards breaking free of this habit is to be aware of this deficiency. Once this awareness has been ingrained, one would be able to absorb all the information relating to the position and taking a balanced view on it. If there is a need to book a loss then it should be done without trying to avoid the situation by looking for alternate opinions.
The other way to circumvent this issue is by making a brief note of all news, opinion and analysis concerning the stocks in your portfolio, both positive and negative. A review of this list with a consciously neutral mind should help in making the right decisions.