Guide for traders

Psychology is the basis for non-rationality in decision-making. Thus, we will mention some of these psychological factors that influence our decisions in order to be able to recognize them, harness them and take advantage of them wherever possible:

• Overconfidence: It occurs when we exaggerate our predictive abilities and ignore the influence of changes or external conditions.

• Representativeness: Essentially, it is the tendency of people to interpret random events as part or representative of specific situations, such as distinguishing and perceiving a series of random events as recurring patterns that may not be valid.

• Conservatism: Conservatism, especially in the unknown, refers to the slow and gradual or even the inability to change views and decisions in the presence of new information and causes investors being unresponsive to new information.

• Attachment-Anchoring: It is a mental shortcut process designed to simplify complex problems in the decision making process. Individuals cling to specific data and base their judgment on a specific information or reference point in which they are hooked.

• Availability bias: It is the tendency of individuals to give greater chances than they should in the most intense or emotionally charged event. A piece of information is considered biased if it contains features that attract attention or create interconnections that individuals tend to remember. In other words, recognition and availability replace the accuracy and relevance of information.

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