Category: behavioral finance
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Trading psychology
Trading psychology is all about emotional and mental states that affect traders’ decision-making processes. Emotions, attitudes, and biases that affect a trader’s behavior and performance fall within this domain. These psychological factors can significantly impact how traders handle risk, deal with losses, and operate during the highs and lows of market cycles. In this lesson,…
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Ambiguity aversion
Many of us might have heard about “risk aversion“, which is a general dislike for risk. But, what is “ambiguity aversion”? To address this question, we need to first distinguish between “risky events” and “ambiguous events”. Let’s do that through a practical example. Imagine a simple coin toss game where you win $1 if the…
