View Full Version : Behavior and Decision Making

Excellent article concerning decision making and behavior in business or every day life. I follow several boards and forums and see this stuff everyday including the real world...I'm sure we all can benefit to some extent from at least understanding the problems.


Net/Net more money is probably made from selling trading ideas than the trades themselves make.

"Those who have knowledge, don't predict. Those who predict, don't have knowledge."
Lao Tzu

Awesome stuff! Why have I not been reading more about behaviorial finance?
I had the thought a little while ago about the chemical aspects of emotion in trading. I'm gonna make my weekly watch-list tomorrow, if I get a few minutes after I'll see if I can't put something together.

Behavioral finance tries to explain the difference between what economic theory predicts people will do and what they actually do in the heat of the moment.
So true. Trading sounds so easy in theory, but when push-comes-to-shove almost everthing you read or thought has almost nothing to do with actually trading.

I didn’t find much along the lines of actual chemical’s and emotion related to abstract concepts like financial instruments, but I did find this paper from Columbia University about emotion and its effects on rationality. Very Very good read if you’re into reading that sort of stuff, if not then just know the most important factors to being a successful trader according to it are:

1. Hanging around people who make more money than you will mess with your head, so don’t.
2. Develop clinical depression.
3. Don’t become anxious though.
4. Once you become depressed don’t make long term trades
5. Get laid regularly
6. Don’t trade hungry.
7. Get plenty of sleep.
8. Don’t have drug cravings.
9. Build a weather machine and/or gain control over all forms of major media.

Seriously, I made up absolutely none of those.