Trade Psychology

Overview

The trading decision is a decision, like any decision. An agent faces a set of choices with possible uncertainty surrounding each alternative, and must make a choice based on their expectations and preferences.

Decision making theory outlines the process of making decisions, including optimizing choices, as well as the pitfalls that can occur when making choices.

Trade psychology is the attitude that a trader must bring to their trading in order to keep their trading aligned with the principles of optimal decision making. In particular, the trade process should be designed to avoid any bias in decision making that is unoptimal.

Avoiding Bias

When designing a trade process, or constructing a psychology or attitude towards trading, the primary factor to consider are the Bias' present in Trading. In particular, your process or psychology should be geared to short-circuiting those bias'.