Behavioural Technical Analysis
'Behavioural Technical Analysis' is an accessible introductory guide to how human nature impacts the markets and those who trade in them. At its core, trading is a decision-making process based on the analysis of data and a judgement on risk and uncertainty. When humans make trading decisions their emotions, physiology and the natural qualities of the brain automatically and subconsciously play a role. Therefore, to better understand the financial markets we need to better understand the behaviour of individual investors within those markets. Behavioural finance - the study of how human sentiment and emotion affects financial decision-making - is a means for achieving this better understanding and it is already revolutionising investment and trading. In particular, it is becoming clear that behavioural finance can help evaluate various aspects of technical analysis - and this is the unique focus of 'Behavioural Technical Analysis'. This book provides an introduction to the six main areas of behavioural finance: dealing with complexity; how humans perceive what is around them; sense of self; aversion to risk; the impact of society and crowds; and gender. An overview is given in each case and for each key concept details are provided about how it can affect the work of technical analysts. The author then builds on these early chapters by applying the concepts of behavioural finance to three key technical analysis techniques: study of extremes, study of trends, and support and resistance. It is shown how behavioural finance can help illuminate long observed technical price patterns and thus serve as a foundation for profitable investment and trading strategies. This book does not presuppose any knowledge of behavioural finance or psychology, skills in mathematics or detailed trading techniques, but instead provides an outline of the key features of behavioural finance that are relevant to technical analysis and advances a new and exciting way of thinking about trading. 'Behavioural Technical Analysis' is a lucid and practical read for all those who want to understand what happens when human nature and financial markets collide - and, most importantly, how to profit from it.
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ambiguity aversion anchoring and adjustment approach asset availability heuristic behavioural finance behavioural finance concepts behavioural technical analysis biases brain broadening formations Chapter Cognitive complexity Confirmation bias contrarians cortisol crowd deal disposition effect earnings emotional example expected experxample extreme feel Figure financial decisions forecasts frame fundamentals future gains gambler’s fallacy gender happening hedge fund heuristic high probability trades human important individual information cascades investment decision Kahneman large numbers look losers loss aversion market matrix mental accounting overconfidence overreaction participants patterns person play portfolio price action price movements profit prospect theory rational economic realise recency bias Regret aversion representativeness bias resistance line role securities sell sentiment share price Soros stock price strategies support and resistance technical analysis tend testosterone things toss trend followers Tversky ultimatum game uncertainty undecided underreact uptrend value function