I want to have a strong discussion about the market psychology, i recently had done an assignment for uni with a very broad topic.. i chose to do the market psychology. we all know and feel that we are not naturally wired for prudent long-term/short-term investments.. research has also proved that.
“Financial losses are processed in the same areas of the brain that respond to mortal danger.” -Jason Zweig
i want to talk about the emotional behavior and biases we have developed through trading. there are many, but i would like to share 3 of them because i think it will change your perception in trading.
Hindsight bias, if some of you have ever experienced looking at the chart after the event has occured and saying.. ahhh how could i have been so stupid.. IT WAS SO OBVIOUS.. this is because when we look at the past.. we disregard all the emotions that were being felt during that moment. the emotion we feel from losing is twice what we feel from the pleasure of winning. i understand now that if someone that is profitable in trading teaches you exactly how he trades..the chances are it wont work for you.. its one big psychological game, i admit that trading with real money has been one of the darkest times of my life.
secondly i would like to talk about Cognitive dissonance. this is from my assignment
The cognitive dissonance phenomenon theory states that when human beings hold two contradicting ideas and beliefs mentally, the discomfort caused by it forces the investor to acquire and may sometimes even invent newer thoughts, create believes or even alter the current belief in order to ease or erase the dissonance that exists. Cognitive dissonance in property buying is known as buyer’s remorse, the fear of regretting a decision. In order to combat cognitive dissonance, investors must always re-evaluate their investment positions as new information and date becomes available to them. An investor cannot always win the market, but rather than losing they can minimize the financial losses, this will evade large losses and evade the feeling of cognitive dissonance.
lastly the confirmation bias
Unlike the other types of psychological behavior occurred during investment decision making, the confirmation bias is the behavioral flaw after the investment decision has been made. As investors, they believe in their investments and actively seek information that will confirm the decision. In other words, finding information to prove that the investment decision made is a wise decision. The confirmation bias act is done subconsciously and the investor continues to emphasize how good of an investment the already made decision was. The confirmation bias prevents the investor from strategically looking at an investment once they have already made it
there are so many market psychologies.. and im sure we all believe that we completely understand and have full control of ourselves when we trade.
i also want to add that, because most of us are focusing on 1 strategy.. it makes it hard for us to find another.. (im not saying it is a bad thing, it can be good or bad).
anyone have any experiences with trading psychology.. and how they plan to overcome it? please i dont want some person commenting pretending that they know everything
“Financial losses are processed in the same areas of the brain that respond to mortal danger.” -Jason Zweig
i want to talk about the emotional behavior and biases we have developed through trading. there are many, but i would like to share 3 of them because i think it will change your perception in trading.
Hindsight bias, if some of you have ever experienced looking at the chart after the event has occured and saying.. ahhh how could i have been so stupid.. IT WAS SO OBVIOUS.. this is because when we look at the past.. we disregard all the emotions that were being felt during that moment. the emotion we feel from losing is twice what we feel from the pleasure of winning. i understand now that if someone that is profitable in trading teaches you exactly how he trades..the chances are it wont work for you.. its one big psychological game, i admit that trading with real money has been one of the darkest times of my life.
secondly i would like to talk about Cognitive dissonance. this is from my assignment
The cognitive dissonance phenomenon theory states that when human beings hold two contradicting ideas and beliefs mentally, the discomfort caused by it forces the investor to acquire and may sometimes even invent newer thoughts, create believes or even alter the current belief in order to ease or erase the dissonance that exists. Cognitive dissonance in property buying is known as buyer’s remorse, the fear of regretting a decision. In order to combat cognitive dissonance, investors must always re-evaluate their investment positions as new information and date becomes available to them. An investor cannot always win the market, but rather than losing they can minimize the financial losses, this will evade large losses and evade the feeling of cognitive dissonance.
lastly the confirmation bias
Unlike the other types of psychological behavior occurred during investment decision making, the confirmation bias is the behavioral flaw after the investment decision has been made. As investors, they believe in their investments and actively seek information that will confirm the decision. In other words, finding information to prove that the investment decision made is a wise decision. The confirmation bias act is done subconsciously and the investor continues to emphasize how good of an investment the already made decision was. The confirmation bias prevents the investor from strategically looking at an investment once they have already made it
there are so many market psychologies.. and im sure we all believe that we completely understand and have full control of ourselves when we trade.
i also want to add that, because most of us are focusing on 1 strategy.. it makes it hard for us to find another.. (im not saying it is a bad thing, it can be good or bad).
anyone have any experiences with trading psychology.. and how they plan to overcome it? please i dont want some person commenting pretending that they know everything