How Behavioral Finance is Responsible For Decisions Made by Traders?
Though stock market does not represent a person but it is really hard to believe this fact. Like person it has different moods at time it can show drastic changes as well. In common terminology we call it as market fluctuations.It may show unpredictable changes one day and get back to normal the very next day. This feature of stock market makes it really difficult for traders to trade in it with good efficiency earning profitable returns. However using best stock futures tips while trading can help them to certain extent for earning good profit. By behavioral finance it is meant that making an attempt to understand market movements, reasons behind sudden price falls of stocks with the help of psychology-based theories. Following are some of the behavioral factors which affects investment decisions : 1)Over Confidence: Traders with this trait take wrong investment decisions mostly. They earn themselves low returns at the end because of thinking in wrong way. Various studies have shown that certain amount of patience and consistent learning is primarily required in stock market trading. Having high confidence in their trading strategy always causes them big problem. 2)Fear of loss : This characteristic of a trader makes them neglect possible profit opportunities because they fear to loose.Often it is witnessed that traders keep on earning loss for longer period of time as their fear is not making them ready to look forward to opportunities present before them. 3)Static nature: Various traders give priority to their choice of trading strategy irrespective of the facts whether it is suitable for current market situation or not. They keep on trading with one particular nature being resistive to changes and earn themselves huge loss. 3)Less information: The supreme factor of all which affects investment decision is lack of information. As we know that stock market is really a complex market and it is difficult to understand it. Traders keep on trading with having vague knowledge about it and because of less knowledge they are not able to perform in a better manner. Often it has been argued that there is no role of behavioral finance in investment decision but to certain extent it does plays a vital role. Traders must learn how to deal with this psychological characteristics of them and to deal with market movements in a better manner. Financial service providers have made trading very easy these days. Traders can any time opt a suitable adviser for themselves and trade in an most efficient manner. They suggest equity tips and others as well to help trader trade with good accuracy. Investing this extra capital can help in earning rich profit . It can concluded by saying this though there are many other factor which are responsible for a trading decision as well.But behavioral finance has a major role in it. To easily cope up with it and learn to trade in a wise manner traders can consult market experts, choose a adviser for themselves.