lukelehepuu

Human Emotions Whilst Trading

FX:EURUSD   Euro Fx/U.S. Dollar
I will do a breakdown of each feeling and how it can affect you and your trading.

These are snippets from an incredible author, Curtis Faith and his book Way of The Turtle. There are some incredible lessons in there, one of the most important is understanding emotions and how they affect our trading decisions.

The below feelings and effects can be used to identify moneymaking opportunities in the market, but to make you aware of your own emotions whilst trading. If you show or know you feel these when trading you might want to find out how to stop it as these traits lead to bad decisions being made. Which in turn, means you lose money.


Hope - I hope this goes up after I buy it.

Fear - I can't take another loss, I will sit this one out.

Greed - I am making so much money, I am going to double my position.

Despair - This trading system does not work, I keep losing money.

Loss aversion - The tendency for people to have a strong preference for avoiding losses over acquiring gains.

Sunk costs effect - The tendency to treat money that already has been committed or spent as more valuable than money that may be spent in the future.

Disposition effect - The tendency for people to lock in gains and ride losses.

Outcome bias - The tendency to judge a decision by its outcome rather than by the quality of the decision at the time it was made.

Recency bias - The tendency to weigh recent data or experience more than earlier data or experience.

Anchoring - The tendency to rely too heavily, or anchor, on readily available information.

Bandwagon effect - The tendency to believe things because many other people believe them

Belief in the law of small numbers - The tendency to draw unjustified conclusions from too little information
Good stuff. Thanks
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