Behavioral Patterns That Sabotage Traders2

Behavioral Patterns That Sabotage Traders2 - Behavioral...

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Behavioral Patterns That Sabotage Traders – Part Two Brett N. Steenbarger, Ph.D. Consider the following psychological scenarios: A student needs to pass an anatomy course final exam in order to successfully complete his first year in medical school. Because his first several exams were on the borderline between passing and failing, the course grade entirely rides on the final. As the time approaches for the big test, the student finds himself increasingly worried about the test—particularly when he misses questions from his practice exams. The worry interferes with his sleep, which in turn makes him even more concerned that fatigue will prevent him from doing well. By the time he takes the exam, he is tired and nervous and misses many questions, often by second-guessing right answers. A young woman has never been particularly uncomfortable in public speaking situations, but now is asked to give the most important presentation of her career. The result of this presentation could spell the difference between landing a major client for her firm vs. losing the client to a competitor. During the talk, she notices that the audience members from the firm she is wooing don’t seem especially attentive. This suddenly raises her anxiety, and she desperately tries to spice up the presentation. When she loses her place in the talk, she becomes flustered, and finishes the presentation on a hesitant note. A basketball player has been the team’s leading scorer, but starts out a game missing his first five shots. The opposing team is double-teaming him, and he is having difficulty breaking free for open looks at the basket. Determined to take matters into his own hands, he decides to penetrate the opposing defense and draw fouls. Instead, he picks up two quick charging calls. Now fearful of being taken out of the game for his fouls, he searches for his shot by moving a little further out on the perimeter. When these shots don’t fall, he stops looking for his shot and throws two errant passes. A trader has several winning trades in a row and, feeling confident, increases his
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This note was uploaded on 08/11/2009 for the course FINANCE Fixed Inco taught by Professor Proflim during the Three '09 term at University of Adelaide.

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Behavioral Patterns That Sabotage Traders2 - Behavioral...

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