“Avoid Bias Mistakes – How to Trade Better” – Trading Tip of the Week

Negotiator #1: “I knew they would back out of the deal. They all deal how that.”

Negotiator #2: “While negotiating with those guys, I knew I would have to back out of the deal. They never deal fairly.”

In the previous situation, none of the negotiators was aware of their bias. The absence of that attention brought unrecognized pressures on the negotiation. Each negotiator did mistakes that’s why. It was also the reason the negotiation failed. Are you aware of your biases when trading?

A bargain betterbe aware of when you might have the following bias mindset.

Cognitive:

• These are biases that you are aware of. They can be easily forgotten when you negotiate. It’s like breathing, automatic. The potential danger arises when you trade automatically and have this bias driving your actions unknowingly. To address it, be aware of what you are aware of. Don’t dismiss a thought too lightly because you think you’ve addressed it. The more aware you are of how you feel, the better you can identify why you feel a certain way.

Unconscious:

• Not being aware of anything is not being aware of it. In a negotiation, when you don’t know a driving force, unconscious biases can be the source. To combat this possibility, look at the source of your emotional feelings. Identify whether you are fearful, elated, expectant, or cautious. Then note whether it is coming from a visual, kinesthetic, or auditory source. Doing that will sensitize your emotions to your mood. That will alert you to the realities of what motivates your action.

Culture:

• It can be risky to lump everyone from the same culture into the same category. People are individuals with their own perspective on reality. The more you see someone as an individual, the more likely you are to see that person for the unique qualities that they possess. Negotiating with them on that basis will improve the opportunity to connect with them at their level. That will lead to a better understanding of why they negotiate in a particular way, while helping them get what they want from the negotiation.

Bullying:

• Some people bully others and some people are just tough. Depending on what you have experienced in life, you may consider someone to be a stalker when negotiating. The person may simply be a tough negotiator. There is a difference in those personality types. Be very careful how you rate someone when negotiating. Because how you rate them will affect how you view them, your actions, and how you deal with them.

Confirmation:

• We see what we expect to see. That affects our perception. Realize that your perception of reality will not always be correct. That should give you pause when you think, “I know he’s like ‘x’. Everyone in his group is like that.” When making broad assumptions, keep in mind that anything that appears to support your beliefs may serve as confirmation of those beliefs. The truth may be further from reality than you think. Don’t confuse seemingly similar assumptions that should be separators of thought.

The more aware you are of the biases you have in a negotiation, the less mental baggage you have. Being aware of that fact and highlighting it in the negotiation should lead to better negotiation results…and all will be well with the world.

Remember, you are always negotiating!