Random Reinforcement: Using arbitrary events to

Random Reinforcement: Using arbitrary events to qualify (or disqualify) a hypothesis or idea; attributing skill or lack of skill to an outcome which is unsystematic in nature; finding support for positive or negative behaviors from outcomes which are inconsistent in nature - like the financial markets.

One of the most interesting topics in trading, and really throughout many areas of life, is what could be called random reinforcement. Random reinforcement, as it relates to harmful trading practices, occurs when a trader attributes a random outcome to skill or lack of skill. The market occasionally rewards bad habits and punishes good habits because the market is so dynamic. It is especially negative if a new trader who wins a few trades, with absolutely no plan whatsoever, attributes this success to "intuition". Random reinforcement can also hurt experienced traders who experience a string of losses and believe they no longer possess skill.
Random reinforcement can create long-term bad habits which are extremely hard to break. It is equivalent to a gambling addict as they keep playing because they win just enough to keep them there, but of course they are losing their money over the long run. A successful card player may also experience a significant draw down, abandon his proven strategy and in doing so gives his edge back to the house.