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BF W6: Introduction to Behaviour Mistakes in Trading - Coggle Diagram
BF W6: Introduction to
Behaviour Mistakes in Trading
Overall trading
Overtrading
over-confidence bias
reason
peers
affected by other retail investors who actively trade
gender
single males more overconfident than single women
individual
investors are more overconfident than
institutional
investors
fintech
easier online platform to search info -> increase overconfidence
solution
avoid convenient trading apps
trade through institutional investors instead of retail ones
be careful of your peers who are retail investors
Buying activities
Chase the winner
invest in stocks with good past performance
solution:
looking forward into the future
problem:
good past performance does not predict good future performance
Chase the attention-grabing stock
invest in stocks on news, media...
problem:
create arbitrage opportunity for institutional investros
Repeated invest in the same stock
solution:
look at the whole portfolio instead of just focusing on the return/loss of one stock
keep reinvesting on stocks profitable to you in the past
reason
overconfidence
home bias
illusion of control