Trading Biases and Financial Behaviour

Everyone make thousand decisions every day. Many of these appear to be rational, but in reality they are not and we don't even realize it. Many of these decisions also affect how we manage our savings.

There are two categories of errors in this case:

• cognitive errors, caused by faulty reasoning as memory, statistical and processing errors but which are simpler to deal with
• emotional biases, caused by the irrational sphere as feelings and emotions and that are more difficult to correct

In this contest, the most important mistake in trading activities is loss aversion, where people prefer to avoid losses instead of making gains. This is because the pain of losing money is nearly double the joy of making a profit.

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