Fear and Greed: Your Secret Weapon

Numerous studies have demonstrated the considerable effect of emotional bias on the stock market as a whole but more importantly on an individual portfolio.  This explains why investors with the same trading “magic recipe” will likely have very different results and why so many investors lose money although the overall stock market return is positive.  Behavioral finance provides answers on how fear and greed affect our investment decisions.

In his book Behavioral Finance and Wealth Management, Pompian provides a list of 20 investors bias with supporting research and pragmatic advices.  Every investors/traders should make sure to understand the emotional bias that have the highest impact on their own actions.  Even better, you should capitalize on others flaws and use that to craft your trading algorithm (ideally automated).

The Micro-Trading strategy has been built based on the science of quantitative behavioral finance.  Since human fundamentally doesn’t change, it has worked consistently but performs better when fear is in the roof !

Disclaimer: For general information purposes only.

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