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Behavioral_economics

Why Traders Should Learn From Cristiano RonaldoCristiano Ronaldo is a soccer legend. He has won the Ballon d'Or five times, which is an award for the best player in the world. He's scored more than 700 career goals, and he's won league titles in England, Spain, and Italy. Not to mention, he's also won the Champions League, Europe's top club competition, five times. Ronaldo is known for his incredible work ethic, athleticism, and his drive to win. He's one of the greatest soccer players ever. Traders can learn greatly from Cristiano Ronaldo. How? Let's go back to his past. When Ronaldo was getting ready to make a big jump in his career to join Manchester United, he had to make a huge choice. Top teams like Barcelona and Inter Milan also wanted him. But Manchester United's coach, Sir Alex Ferguson, promised him something special: he'd get to play in lots of games, at least 50% of total matches in the season. An offer which he agreed to take. Even when Ronaldo was still young he wasn't oriented about getting rich or famous fast. Ronaldo picked Ferguson's team because he wanted to get better at soccer by having more opportunities to play. He believed in process. This decision helped him become the star we all know now. This is a good story to think about for anyone starting to trade. Trading isn't just about making fast cash. It's about learning how the market works and making smart choices. Think like Ronaldo did: focus on practicing and getting better, not on the money you could make today or tomorrow. Now, let's go to another field. Let's look at example from a doctor who is about to perform surgery. The doctor was faced with a critical decision: A 55-year-old man with a serious heart condition needs surgery to continue working and living without pain. The operation has clear benefits, potentially extending the patient's life from age 65 to 70. However, there's an 8% risk associated with the surgery, meaning that there's a chance the patient may not survive the operation itself. The doctor, knowing these odds, decides to go ahead with the surgery, and thankfully, it's a success. This situation parallels the decisions traders make. They analyze market conditions, evaluate potential risks and rewards, and make their best judgment call on whether to buy or sell an asset. Much like the doctor who bases their decision on medical knowledge and the patient's condition, a trader relies on economic data, company performance, and market trends. But even with the best analysis, the outcome is not guaranteed. The doctor's decision should not be judged solely on the outcome—the patient's survival—because it was made with the best information available at the time. Similarly, in trading, a decision should not be judged only by the profit or loss that results. A trade made on sound analysis can still lose money if the market goes the other way, just as a profitable trade could result from an ill-informed decision that happens to get lucky. It’s like running past a dynamite factory with a lit torch. If you make it past and nothing blows up, it might seem like a good decision because you’re okay. But was it smart to run with that torch in the first place? Not really. That's what traders have to watch out for: not tricking themselves into thinking a risky bet was smart just because they didn't lose money this time. For new traders, the best thing to do is make a trading plan and stick to it. Write down why you're making each trade. Later, you can look back and learn from what you did right or wrong. It’s not about quick wins; it’s about getting better over time. Another example is if you're learning to cook. You don’t expect to be a great chef right away. You start with simple recipes and get better with practice. And if a dish doesn’t turn out perfect, it doesn’t mean you're a bad cook. It's part of learning. In trading, remember the idea of outcome bias. This is when you think a decision was good just because things ended up okay. This can really mess with your head, making you overconfident or too scared to make your next move. So, traders should be like athletes or chefs, caring more about how they do their work than just the win or the perfect meal. Believe in the process because in the long run, it's how much you learn and get better that really matters.
SP:SPXEducation
by WayanEko
The 3 Dimension Trading / Investing 3D Investing or Trading = Technical Analysis + Depth Analysis Depth Analysis: • Macro analysis or / and • Micro analysis or / and • Other analysis See the following video "3rd Dimension Analysis" link for other analysis. Many use either technical or fundamental analysis alone in their research work, I observed they likely to struggle with confidence to make the entry judgement call. We can develop a greater confidence in how we time the market by combining TA + FA. 3 types of gold for trading: • COMEX Gold 0.10 per troy ounce = $10.00 • E-mini Gold 0.25 per troy ounce = $12.50 • Micro Gold 0.10 per troy ounce = $1.00 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
COMEX:GC1!Long
by konhow
Apple and Tesla Popularity: Its in our DNA to buy high and panicBehavioral Finance explores the concept of why we are wired to make the same mistakes over and over as a species. Recently, I started reading a book called "Popular" by Mitch Prinstein , where he discusses that its in our DNA to helps us survive. We have done better by doing popular things in nature. When we go with the flow of the group and hunt together and fight together, we live better. Those outcasts who go against the group are shunned and then removed. In finance however, our popular instincts may conflict at times with our investment selection choices.
NASDAQ:AAPL
by ValuePig
5
📌Prospect theory; what is it? Humans are not psychologically good traders by nature ! Have you ever wondered, why trading with real money is overwhelming for you?! The reason should be sought in the psychological aspect of the case. If you lose amount money in the market, you must gain several times ,so the feeling of happiness overcomes the pain of your initial loss! although all traders, even successful traders, have tasted loss and it is an inevitable part of the trading journey !But the successful traders have learned how to control the psychologically of it and not be limited by the feelings of a loss! Prospect theory : also called loss-aversion theory is a theory of behavioral economics and behavioral finance that was developed by Daniel Kahneman and Amos Tversky in 1979. .Daniel Kahneman the author of ' Thinking, Fast and Slow ' book is a Nobel Laureate in Economics who is a psychologist by training. He won the prize mostly for his work in decision making, specifically Prospect Theory. This book distills a lifetime of work on the engine of human thinking, highlighting our cognitive biases and showing both the brilliance and limitations of the human mind. This summary attempts to capture some of the more interesting findings. Based on results from controlled studies ,he describes how individuals assess their loss and gain perspectives in an asymmetric manner (see loss aversion). For example, for some individuals, the pain from losing $1,000 could only be compensated by the pleasure of earning $2,000 or even more. Thus, contrary to the expected utility theory (which models the decision that perfectly rational agents would make), prospect theory aims to describe the actual behavior of people. In the original formulation of the theory, the term prospect referred to the predictable results of a lottery. However, prospect theory can also be applied to the prediction of other forms of behaviors and decisions. Prospect theory: stems from Loss aversion, where the observation is that agents asymmetrically feel losses greater than that of an equivalent gain. It centralises around the idea that people conclude their utility from "gains" and "losses" relative to a certain reference point. This "reference point" is different for each person and relative to their individual situation. Thus, rather than making decisions like a rational agent (i.e using expected utility theory and choosing the maximum value), decisions are made in relativity not in absolutes. Consider two scenarios; 100% chance to gain $450 or 50% chance to gain $1000 100% chance to lose $500 or 50% chance to lose $1100 Prospect theory suggests that; When faced with a risky choice leading to gains agents are risk averse, preferring the certain outcome with a lower expected utility (concave value function). Agents will choose the certain $450 even though the expected utility of the risky gain is higher When faced with a risky choice leading to losses agents are risk seeking, preferring the outcome that has a lower expected utility but the potential to avoid losses (convex value function). Agents will choose the 50% chance to lose $1100 even though the expected utility is lower, due to the chance that they lose nothing at all These two examples are thus in contradiction with the expected utility theory, which only considers choices with the maximum utility. Also, the concavity for gains and convexity for losses implies diminishing marginal utility with increasing gains/losses. In other words, someone who has more money has a lower desire for a fixed amount of gain (and lower aversion to a fixed amount of loss) than someone who has less money. source: wikipedia Well, with these concepts , we conclude that Losses loom larger than gains! the Psychological value of a loss equal or even less than previous profit, can really affect our mindset , and feeling for trade, actually trading bots are better than us in this aspect, or better to say ;humans should have a proper trading system , also should cultivate our discipline and diligence to be a good trader(psychologically ) ! this article is For informational purposes only!
Education
by PRO_SMART_Trader
9