Financial Risk Taking: An Introduction to the Psychology of Trading and Behavioural Finance
In Financial Risk Taking, trader and psychologist Mike Elvin explores the complex relationship between human behaviour patterns and the markets, offering the reader a context in which to assess their own strengths and weaknesses as investors. The book offers an apposite and uncomplicated system of skills development in the form of competences and competencies that can be applied anywhere along the continuum from casual investor to full-time day trader. Elvin presents a Comprehensive Model of Trading Competence (the MOT) as well as the concepts of analysis and refutation, the paramouncy principle, and self-sabotaging behaviours such as the Santa Claus syndrome and Bohica effect.
Areas covered include: Emotions - are they functional or disabling? How do the mechanisms of fear, greed and panic work? Motivation and perception - how do belief paradigms affect perception and performance? What perceptual errors influence decisions to the trader's detriment? Information processing and risk assessment - how does information overload affect Stress How does stress affect investment decisions? Technological and mathematical anxiety - why do we avoid learning the skills we most need? What levels of ability are required? Can psychological and biological theories assist in our understanding of investors' performance?
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1 Introduction Between Scylla and Charybdis
2 Understanding Trading Competence
3 A Comprehensive Model of Trading Competence
4 Taming Stress to Become a Better Trader
5 The Psychology of Perceptual Bias
6 Emotions Emotional Intelligence and the Trader
7 Martial Arts and Budo Zen Controlling Fear and SelfSabotage