Humans have weaknesses that hamper their trading capabilities. Many were developed in ancient times and were important for survival. I will enumerate the most important:
1) Loss Aversion: the strong tendency for people to prefer avoiding losses over acquiring gains
1) Loss Aversion: the strong tendency for people to prefer avoiding losses over acquiring gains
2) Sunk Cost Effect: The tendency to treat money that already has been committed or spent as more valuable than money that may be spent in the future
3) Disposition Effect: the tendency for people to lock in gains and ride losses
4) Outcome Bias: The tendency to judge a decision by its outcome rather then by the quality of the decision at the time it was made
5) Recency Bias: the tendency to weigh recent data or experience more than earlier data or experience
6) Anchoring: the tendency to rely too heavily, or anchor, on readily available information (more…)