Quantum BiasSectionsPsychology
Psychology
The biases that cost traders money, from the research.
Hindsight Bias in Trading: Why Replays Make You Overconfident
Once you know how a session ended, the setup looks obvious. Research from Fischhoff to Biais and Weber shows why, and how hindsight bias hurt bankers' performance.
Why Traders Cut Winners and Hold Losers (Disposition Effect)
Investors sell winning positions far more readily than losing ones. What 40 years of research shows, from 10,000 brokerage accounts to professional futures traders.
How to Stop Overtrading: What 66,465 Brokerage Accounts Reveal
The households that traded most earned 11.4% a year against 17.9% for the market. What the research on overconfidence shows, and how traders can measure their own.
Loss Aversion in Trading: Why Losses Hurt Twice as Much
In Tversky and Kahneman's experiments, losses weighed about 2.25 times as much as equal gains. Professional futures traders showed the related bias more than students. What loss aversion does to traders, and how to limit it.
FOMO in Trading: Why Traders Chase the Stocks in the News
Individual investors are net buyers of attention-grabbing stocks: those in the news, with abnormal volume or extreme moves. Institutions are not. What Barber and Odean found, and how to keep headlines from choosing your trades.