The paper entitled “ being emotional during decision making- Good or Bad? An empirical investigation”, written by dennis page, Myeong-Seo and Lisa Feldman Barret were investigated the role of emotions in stock trading via simulation involving 101 traders recruited from investment clubs and paid $100 to $1000 based on performance during simulation. They conclude that:
- traders who experience more intense emotions while trading tend to outperform
- traders who keep their emotions from affecting trading decision tend to outperform.
- Traders who are better able to identify the intensity of their current negative emotions tend to outperform based on superior ability to control the possible biases induced by these emotions. Those are less able to identify their specific feeling at the moment decision underperform due to the influence of emotions they ignore or do not understand
During the discussion there several question were asked such as the influence of another factor instead of internal factor coming from the traders.
I also post the question about how we can prevent from being knocked off track by our negative emotions during trading. I found the answer that we should try to enhance of our degree of self conscious, we should try to make choices not only based on what the stock market telling us and what other people were doing, but also we have to put big attention on basis of rules that we are putting in advance.
Another question were should we discard our first impulses altogether since I assume in every starting of transaction we will be influenced by a lot of factor that might be come together in the same time, for instance we look for something we like and then we want to buy it and in the same time other people didn’t like it and they sell it. It means we have to involve our emotions to make our decision in the same time to face with external factor that have high possibilities to influence our decision. I conclude that we have to make policy and try to limit and under control of our self therefore it will help to decide right decision.