Human Tendencies That Affect Trading
Successful trading is based mainly on trying to follow the right trading plan. But even the most disciplined can be affected sometimes by certain human tendencies that can turn that around. There are certain human quirks that seem to affect trading but most traders don’t seem to be aware of. Here are some of them.
Fear Of the Unknown
It is a human tendency to feel fear about something that one doesn’t know. This may limit traders on making those calculated risks. Some may just stay on a certain comfort zone, maintain a position where they have an idea of what the results may be. But this can also lead to missing out on valuable opportunities that may be present at one time or another. It can sometime be an unfounded fear that can seriously affect one’s trading success.
Some traders may not be aware of this, but information bias can also have a serious effect on trading. It is a tendency to accept only data and information that one likes to hear. Upon accepting this information, they seemed more biased to it, even though it may be more of an opinion than fact. In the process, some traders may rely more on information based on opinions rather than the facts itself. This may cause a certain trading strategy to fail because inputs used are not necessarily the real facts currently happening in the market.
The Thrill Of Anticipation
It may not be that easy to understand this common human tendency since most people go through it. Some may even call it daydreaming, but the thrill of anticipation of a future event can also affect trading. Anticipating something good that will happen is not always bad. But sometimes some people are more excited and relish the thrill of anticipation that they sometimes fail to act upon it and do something to make it a reality. In traders, anticipating too much rather than acting on it can certainly affect trading performance and success.