Finance Psychology: How To Begin Thinking Like A Professional Trader (This Workbook About Behavioral Finance Is All You Need To Be Successful In Trading) E-Book

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• Herausgeber: epubli
• Kategorie: Fachliteratur
• Sprache: Englisch

Veröffentlichungsjahr: 2020

Beschreibung

Finance Psychology: How To Begin Thinking Like A Professional Trader (This Workbook About Behavioral Finance Is All You Need To Be Successful In Trading). Trading on the stock exchanges seems to be very easy for many financial players, especially at the beginning. They are convinced that it only requires a good entry signal to be successful on the markets in the long run. The longer they trade, the more the participants understand that it is not the entry signals that decide on victory or defeat in this business! It is still the case that most traders lose money. Only a few of them manage to make permanent profits from the markets, or even earn their living by trading. The reason for this is not that the traders choose "bad" entrances. The reason that most traders lose money is their psyche. Trading is mainly characterized by emotions and 90-100% psychology. Who is a winner or loser in trading is determined by the mental strength of the trader. Only those who actively work on their personality, mental strengths and belief patterns will be successful in trading. "It is up to each individual to use the powers of his psyche for or against his success. This "Workbook about Behavioral Finance" is all you need to be Successful in Trading (Money Management Trading Guide).

Leseprobe

Finance Psychology:

How To Begin Thinking Like A Professional Trader

(This Workbook About Behavioral Finance Is All You Need To Be Successful In Trading)

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Finance Psychology: How To Begin Thinking Like A Professional Trader

Financial psychology - origin until today

Framing effect

Sunk cost effect

Heuristics

Disposition Effect

Trading Fears - The central issue in trading

Meaningful fears and meaningless anxieties

The longing for security

The view of things

The control center in the brain

The power of the unconscious

Statements of faith

Autoaggression (self injury)

Which characterize the first years of life

The power of discipline - training the will

Stress and trading - the right dose makes the difference

Combat escape response

Stress due to loss of control

Recognizing and overcoming stress

Trading and personality

Trading trap: Thinking, believing, hoping

Small trading account - big problems

Trading with sense

Finance Psychology: How To Begin Thinking Like A Professional Trader

Trading psychology is becoming more and more important for investors. Even the newcomers to this business increasingly understand that the psyche plays a very important role in order to be successful on the stock exchange. No wonder, since the constant ups and downs on the markets are largely caused by the emotions such as fear and greed of speculators themselves.

Professional traders assume that about 80 percent of trading success is determined by the psyche. Some even speak of 100 percent. Scientific studies on this topic also clearly prove: Above all emotions decide on victory or defeat, especially fears have a great effect. After all, they significantly influence the actions of the players. In addition, excessive expectations and illogical patterns of thought and behavior make the path to profitable trading more difficult.

At the beginning, trading seems to be a kind of Formula 1 race of money multiplication for many. If one takes a closer look at the wishes of the trading beginner on a psychological level, his all too human intention becomes clear: he wants fast, secure profits and usually completely ignores the risk of loss. Moreover, many people do not want to take responsibility for their trading decisions. Instead, they blame others for mistakes or losses.

Professionals behave differently. For them, trading is a professional business, which is mainly determined by risk. They see their task as managing it. To do so, they need certain previous knowledge and skills.

In the following chapters, you can read about the mental ways of thinking and acting that are necessary to be permanently profitable on the speculative capital market. But you will also learn how to expose typical mistakes and how to eliminate them effectively.

I hope you enjoy reading it.

Financial psychology - origin until today

Financial psychology is a relatively young branch of psychology. It investigates how people behave and experience when dealing with money or money-related products. This science focuses primarily on the perception and processing of information related to financial products.

In the financial sector, the research area of Behavorial Finance has stood out. This field of research emerged in the early eighties in the USA. It combines traditional economic research methods with expert knowledge of psychology. The research results of Behavioral Finance can help private investors and professionals to better understand their actual motives for investment decisions on the speculative capital market. They make it clear according to which patterns of thought and behaviour the players usually act.

Behavioral Finance assumes that investors act in an illogical way, mainly due to unconscious behavior. There is a well-known saying: "If you want to be smarter than the market, you have already lost. If you are aware of your irrational behaviour, you have a chance".

The fact that stock market events do not result exclusively from rational behaviour was described by the eminent economic theorist John Maynard Keynes as early as 1936 in his major work "The General Theory of Employment, Interest and Money". However, the true causes of irrational behaviour in risky transactions were proven in 1979 by the research paper "Prospect Theory". The two economists Daniel Kahneman and Amos Tversky recognized that people usually do not like risk - unless they are about to lose. Then they love risk. This "Prospect Theory" by Kahneman and Tversky, which is the foundation of modern finance, was awarded the Nobel Prize for Economics in 2002.

In the following years, Richard Thaler, Hersh Shefrin, Robert Shiller, Terence Odean and Martin Weber provided further in-depth knowledge in the field of behavioural economics.

Another key finding of Behavioral Finance research is that speculatively oriented traders are consciously or unconsciously guided primarily by their emotions. This inevitably leads to (wrong) decisions. Typical emotions are the fear of losing money when things are going badly and the greed for more money when things are going well.