As I prepare for The Galtere Institute's Behavioral Finance symposium, I am doing what I always do before I speak - catching up on the latest studies on emotion and risk decision making. For example, did you know that there is actually still much disagreement in science about what emotion…
Shull's first article "What Would Freud Say? Stroll Down Freud's Mental Path to Profits", December 2004. When I wrote this I had NO idea whatsoever that I would ever publicly write or say ANOTHER word on the psychology of trading. It was just an idea I had based on re-writing…
Originally posted on Business Insider, April 17. Conventional wisdom in trading psychology used to depend on two primary tenets – discipline and ‘control your emotions’. But that was before neuroscience started putting traders, poker players and other risk-gamers into brain scanners. Now that we know that all decisions depend on…
to discuss her recent book Market Mind Games
Here are some of the things I've been thinking about: The two areas in trading that separate the men from the boys (so to speak) are: 1.) The ability to divide environmental perceptions in half and process them separately. First I ask myself what I am feeling and in doing…
UPDATE TO POST "Joining the Options Counter Culture" 1. Nice to have a tutor in thinkorswim software ... better to have it be the same guy you drink margaritas at home with. 2. A put spread risks less than just buying calls. 3. I am actually bearish for May and…
Despite the fact that the guy who got me into the trading business in 1994 had been almost an original CBOE floor member, despite the fact that one of my best trades ever was a covered write on LU in July of 1999 (think sell Lucent @75), despite the fact…
Somewhere down the road, you just might find you agree with more than you expected. Or worse, learned a thing or two about making better decisions in the face of UOUP (rhymes with soup) - uncertain outcomes uncertain probabilities.
All this suggests that emotions are key information providers when deciding under uncertainty. They make us tuned to our environment. Actually, in some contexts of fast and intuitive decision-making in the face of unstable (high vol) conditions, one expects that the stronger the emotional uncertainty signals of the day-trader, the higher the performance.
I mean we also hear "believe in yourself" but where do these advisories leave you when a trading idea is going wrong? How do you handle the teeter totter that holds belief and conviction on one side and price and risk management on the other? What fulcrum can you depend on?
