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Posts Tagged computer transactions
How Human Nature Can Get the Better of You When Investing
Despite the rise of computer transactions over the past two decades, humans and human decision making still underpin the billions of transactions that take place on the stock market each year. This is particularly the case if you’re seeking to invest at home, where you’ll have a direct relationship with the trades you do. One thing that might affect this is our fundamental psychology as human beings, our human nature. In the following article, I’ll talk a little bit about how investor psychology is particularly important to understanding the machinations of the stock market, and traits you should be self aware of when trading.
The main potential flaw of our shared human nature is the fact that we are all loss averse. Take the following scenario for example: you can choose between two alternatives, one situation where you have $90 and make $10, or another situation where you have $110 and lose $10. If you’re like most other people, you’ll choose the former even when you should be equally indifferent to both of them. Now, applying to investing situations that you’re likely to encounter, the tendency to be loss averse will cause you to act irrationally when facing stock that’s gone down in price. You’re more likely to hold on in the hope that you can atleast recouperate your outlay, though this might be a flawed position to take.
Tags: computer transactions, due diligence, human decision, investor psychology, machinationsRelated posts
How Human Nature Can Get the Better of You When Investing
Despite the rise of computer transactions over the past two decades, humans and human decision making still underpin the billions of transactions that take place on the stock market each year. This is particularly the case if you’re seeking to invest at home, where you’ll have a direct relationship with the trades you do. One thing that might affect this is our fundamental psychology as human beings, our human nature. In the following article, I’ll talk a little bit about how investor psychology is particularly important to understanding the machinations of the stock market, and traits you should be self aware of when trading.
The main potential flaw of our shared human nature is the fact that we are all loss averse. Take the following scenario for example: you can choose between two alternatives, one situation where you have $90 and make $10, or another situation where you have $110 and lose $10. If you’re like most other people, you’ll choose the former even when you should be equally indifferent to both of them. Now, applying to investing situations that you’re likely to encounter, the tendency to be loss averse will cause you to act irrationally when facing stock that’s gone down in price. You’re more likely to hold on in the hope that you can atleast recouperate your outlay, though this might be a flawed position to take.
Tags: computer transactions, due diligence, human decision, investor psychology, machinationsRelated posts