Short T. The Psychology of Successful Trading

New York: Routledge, 2018. — 188 p. — ISBN 978-1-138-09627-1.This book is the first to demonstrate the practical implications of an important, yet under-considered area of psychology in helping traders and investors understand the biases and attribution errors that drive unpredictable behaviour on the trading floor. Readers will improve their chances of trading successfully by learning where cognitive biases lead to errors in stock analysis and how these biases can be used to predict behaviour in market participants. Focussing on the three major types of bias – Belief-Formation, Quasi-Economic, and Social – the book provides a rigorous discussion of the literature before explaining how each of these biases plays out in financial markets. The author brings together the fields of philosophical psychology and behavioural finance to introduce ‘Theory of Mind,’ providing readers with tools to predict biases in others as well as using these predictions to form optimal trading strategies for themselves. Readers will also learn to understand their own behaviours, counteracting biases such as overconfidence and conformity – and the ‘curse’ of their own knowledge – to strengthen trade performance. Pairing his skill and experience with an extensive research bibliography, Short positions the foundational sources of cognitive biases alongside concrete examples, experimental designs, and traders’ anecdotes, helping readers to apply theoretical guidelines to real-life scenarios. Shrewd professionals and MBA students will benefit from The Psychology of Successful Trading’s intuitive structure and practical focus.Acknowledgements
Introduction
Outline Of Book
Beating the Market
Theory of Mind
Better Traders Have Better Theory Of Mind
How Theory Of Mind Works
Belief-Formation Biases I
Belief Perseverance Bias And Correlation
Representativeness Heuristic
Rhyme As Reason Effect
Availability Heuristic
The Gambler’s Fallacy
Belief-Formation Biases II
Confirmation Bias
Clustering Illusion
Position Effect
Conjunction Fallacy
Hindsight Bias And The Antifragile
The Antifragile And Options
Quasi-Economic Biases
Certainty Effect
Reflection Effect
Isolation Effect
Endowment EffectSocial Biases I
The ‘Curse Of Knowledge’
The Advantages Of Disadvantages
Dunning-Kruger Effect And Expertise
False Consensus Effect
Conformity Bias
Social Biases II
Fundamental Attribution Error
Halo Effect
Self-Presentation Bias And Over-Confidence
Over-Confidence, Or Why Females Are Better Traders
Bibliography
Index