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TradersRisks, Decisions, and Management in Financial Markets$
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Mark Fenton-O'Creevy, Nigel Nicholson, Emma Soane, and Paul Willman

Print publication date: 2004

Print ISBN-13: 9780199269488

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780199269488.001.0001

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A Framework for Understanding Trader Psychology

A Framework for Understanding Trader Psychology

Chapter:
(p.74) Chapter 5 A Framework for Understanding Trader Psychology
Source:
Traders
Author(s):

Mark Fenton-O'Creevy

Nigel Nicholson

Emma Soane

Paul Willman

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199269488.003.0005

There are certain motivational variables and a general cognitive variable that tend to affect all traders to varying degrees depending on their individual circumstances and characteristics. This chapter discusses the general forces present in the trading environment that could either aid traders' effective performance or blow them off course. Although humans are fundamentally irrational, human rationality undermines a logic that cannot be formally structured like mathematics but is rather one that satisfies our biological identity and needs. This chapter establishes a self-regulation framework based on how the self must be able to maintain mood, purpose, sense of efficacy, consistency, identity, and other such attributes. Through this framework, we can see how some behaviours may seem irrational, especially in the context of finance and economics, but are rational in terms of goal achievement and the maintenance of self-image and self-control.

Keywords:   cognitive variables, motivational variables, self-regulation, goal achievement, self-image, self-control

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