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Year 2017 is closing and I am in mood for some light-hearted banter yet to write meaningful article. So here I go talking about some behavioral economics and its implication on forex trader and his trading. Behavioral economics in essence is a method of analysis that applies psychological aspect of human behavior on economic decision-making.
Although the terms mentioned in this article have wide implications in different economic decision making process, I will keep the scope of these terms to forex trading and investing only.
  • Framing

Fig. 1
Framing refers to how a trader perceives a forex movement of a pair. It’s a glass half full or glass half empty kind of situation(same as above comic strip). In last 2 weeks gbp/nzd is correcting from 1.98 to 1.90 zone. So when price retrace to 1.93, a trader may think, wow the pair is at 3% discount and will try to buy only to find price go even lower. So it is important to see that pair is in strong corrective mode after more than 10% rise in last 2 months.
The key is to perceive the market correctly and never feel that “I am most intelligent”. Follow technical’s and wait for the pair to form a support/resistance in strong correction / r…
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Yuliya_N avatar
Yuliya_N 3 Jan.

Very nice article. Good job friend!

Annyrio avatar
Annyrio 3 Jan.

Very good!!!

hrustiashka avatar

Well written article!

Vlad73 avatar
Vlad73 8 Jan.

well done

Siarhei89 avatar
Siarhei89 14 Jan.

good article!!!

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1. Introduction.
Vous est-il déjà arrivé de voir ce qui n'est pas ?
Nous analyserons dans le présent article l'impact des biais cognitifs sur les performances de l'investisseur et passerons en revue les principaux biais cognitifs, les erreurs et conséquences généralement observés dans de telles situations. Cet article a pour but d'aider à reconnaître ces biais cognitifs pour les éviter et prendre ainsi les meilleures décisions dans votre activité de trading. Commençons avant tout par définir ce qu'est un biais cognitif.
2. Définition.

La cognition désigne l'ensemble des processus mentaux lié au savoir tel le raisonnement, l'intelligence, la mémoire et le langage. Il regroupe les activités psychiques en lien avec le traitement de l'information et se distingue de l'affectif qui lui se rapporte aux émotions.
Un biais cognitif, ou biais psychologique, est un mode de pensée qui dévie de la pensée rationnelle. L'ensemble de ces biais répond au besoin de l'individu d'apporter un jugement rapide par des raccourcis cognitifs et a pour l'essentiel trois causes :
1. Limites des ressources cognitives :
  • limites au niveau du temps disponible à la réflexion
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al_dcdemo avatar
al_dcdemo 17 Mar.

Useful content, nice presentation and very well written. Nice job!

CharmingRimma avatar

so good!

Olkiss70 avatar
Olkiss70 25 Mar.

very interesting

Yulia10 avatar
Yulia10 25 Mar.

useful article!

s_amira avatar
s_amira 8 May

Good article, thanks.

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Men are mistaken in thinking themselves free; their opinion is made up of consciousness of their own actions, and ignorance of the causes by which they are condicioned. Their idea of freedom, therefore, is simply their ignorance of any cause of their actions

What is the price?
The price is a glass jar full of pennies. The question is if you can guess how many pennies contains, because that is what worth. Seems easy, right? However, this is the kind of problems that, as pick up James Surowiecki in his book Wisdom of Crowds, the group does better than the individual. As operators, we tend to overestimate or underestimate the exact amount of pennies the jar containing. In contrast, the average result of all individual estimates provides a result that is surprisingly close to reality. In fact, this number is the reality in Forex.
The game does not have any tricks: all the individuals watch the same jar, all the individuals share the same information; as it would occur in an ideal market situation in that no operator would take advantage of their access to insider information. In a zero-sum game means that, agree the model of economic rationality, no player would have a competi…
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Airmike avatar
Airmike 22 Mar.

very nice price - value explanation

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Overview This article will discuss the ways in which emotions influence our trading decisions. We will also consider the mass psychology of FX market participants with a view to utilising their behaviour to improve our trading edge. Man or Machine?Do you want to replace your emotional, impressionable self with an all-encompassing black box to execute your FX trading plan?The vast majority of the most successful traders in the world possess, or have learned to develop, a state of emotional disconnectedness from their trading. The ability to doggedly stick to a plan, even through periods of drawdown, is a testament to their remarkably robotic decision making ability. In a bid to artificially recreate this trait in your trading you may have considered programming, or buying, your own automated algorithm. However, if like me, you find it difficult to calculate support/resistance levels, program recognisable chart patterns, and quantify many other seemingly arbitrary elements with any useful accuracy, you will also begin to realise the sheer number of interlinked factors that must be considered. Discretion, born out of intuition, is often something we exhibit without realising, but it …
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hedonist avatar
hedonist 12 Oct.

@OneGoodTrade: Thank you for your kind comments. In my opinion, psychology should have as equal consideration as technical and fundamental analysis. I don't think any trader can be successful if they have no regard for their emotions.

hedonist avatar
hedonist 12 Oct.

@doctortyby: I have been trying to reply to your comment since Monday, but there has been a glitch on this website. Anyway, thank you for your comment and I'm glad you liked the "psychology behind the candlesticks". With respect to "profitability ratio", it's a bit beyond the scope of this article, so maybe that's something I can address next time. Thanks buddy.

SpecialFX avatar
SpecialFX 13 Oct.

Good article, anyone who mentions Jesse Livermore and Richard Dennis (not Ron Dennis! lol) gets my vote :) I have the books you mention as well. @OneGoodTrade Unfortunately, any articles that have a lot of text to read, or are based on fundamental analysis, or psychology, or have a long term view of the market, or are too techie, get little attention. A few charts with tons of indicators, a few sentences, short time frame, that is what gets views, even if the strategy/prediction is completely flawed. There is little correlation between the quality of the articles and how popular they get :)

hedonist avatar
hedonist 13 Oct.

@SpecialFX: Ron Dennis? The old McLaren team principal, haha! I actually read your article from last month about shorting the YEN. That was really well put together and a good read. Obviously it was good, because it won, lol! I do agree with you about lengthy articles with limited pictures etc receiving low populartity ratings. I should have considered people for whom English isn't their mother tongue. Perhaps I'll make the next one slightly more readable. Oh and Jesse Livermore - Absolute legend. A shame he committed suicide. Maybe there's a lesson to be learnt there somewhere...

bmg avatar
bmg 30 Oct.


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