The document proposes a model to analyze individual trading behavior and recognize unique "trading fingerprints". It hypothesizes that each trader has distinctive real-time decision-making patterns when interacting with financial markets. These patterns represent an integration of personal, contextual, and emotional variables. The model describes interrelations among market events, trading behaviors (buy/sell/hold), and simultaneous emotions/reactions, with the goal of advancing understanding of trading personality traits.
Abstract
The idea of an Efficient Market first came from the French mathematician Louis Bachelier in 1900: « The theory of speculation ».
Bachelier argued that there is no useful information in past stock prices that can help predicting future prices and proposed a theory for financial options’ valuation based on Fourier’s law and Brownian’s motions (time series).
Bachelier’s work get popular in the 60s during the computer’s era.
In 1965, Eugene Fama published a dissertation arguing for the random walk hypothesis (Stock market’s prices evolve randomly: prices cannot be predicted using past data).
In 1970, Fama published a review of the theory and empirical evidences
The EMH (Efficient Market Hypothesis): Financial markets are efficient at processing information. Consequently, the prices of securities is a correct representation of all information available at any time.
Weak:
Not possible to earn superior profits (risk adjusted) based on the knowledge of past prices and returns.
Semi-strong:
Not possible to earn superior profits using all information publicly available.
Strong:
Not possible to earn superior profit using all publicly and inside information.
The CAPM describes the relationship between market risks and expected return for a security i (also called cost of equity), E(Re_i):
Re_i = Rf – Bi(Rm – Rf)
With:
Rf = Risk free rate (typically government bond rate)
Rm = Expected return for the whole market
Bi = The volatility risk of the security i compared to the whole market
(Rm – Rf) is consequently the market risk premium
According to the EMH, for a well-diversified portfolio, expected returns can only reflect those of the market as a whole. Consequently, in the CAPM formula, It would involves that for a diversified-enough portfolio: β = 1 so Re = Rm
Investors want to value companies before making investment decisions.
A typical way to do so is to use the Discounted Cash Flow (DCF) method:
See also: Prospect theory, disposition effect, heuristic, framing, mental accounting, Home bias, representativeness, conservatism, availability, greater fool theory, self attribution theory, anchoring, ambiguity aversion, winner's curse, managerial miscalibration and misconception, Equity premium puzzle, market anomalies, excess volatility, Bubbles, herding, limited liabilities, Fama French three 3 factors model.
. I predict and hypothesize that every actor/trader has Unique Trading Identity and therefore Individual Trading Behaviour in the real-time interaction with the financial market. This behaviour, and emotional state (somatic marker) are mapped and manifest it in these real-time (Time Stamped) trading patterns flows. This Individual Trading Behaviour can be formalized and recognized as Trading „Fingerprint” (Trading Stamp).
This paper examines professional investors can apply the principles within and around Behavioural Finance to maximise investment skill and minimise any negative impact of behavioural bias.
Abstract
The idea of an Efficient Market first came from the French mathematician Louis Bachelier in 1900: « The theory of speculation ».
Bachelier argued that there is no useful information in past stock prices that can help predicting future prices and proposed a theory for financial options’ valuation based on Fourier’s law and Brownian’s motions (time series).
Bachelier’s work get popular in the 60s during the computer’s era.
In 1965, Eugene Fama published a dissertation arguing for the random walk hypothesis (Stock market’s prices evolve randomly: prices cannot be predicted using past data).
In 1970, Fama published a review of the theory and empirical evidences
The EMH (Efficient Market Hypothesis): Financial markets are efficient at processing information. Consequently, the prices of securities is a correct representation of all information available at any time.
Weak:
Not possible to earn superior profits (risk adjusted) based on the knowledge of past prices and returns.
Semi-strong:
Not possible to earn superior profits using all information publicly available.
Strong:
Not possible to earn superior profit using all publicly and inside information.
The CAPM describes the relationship between market risks and expected return for a security i (also called cost of equity), E(Re_i):
Re_i = Rf – Bi(Rm – Rf)
With:
Rf = Risk free rate (typically government bond rate)
Rm = Expected return for the whole market
Bi = The volatility risk of the security i compared to the whole market
(Rm – Rf) is consequently the market risk premium
According to the EMH, for a well-diversified portfolio, expected returns can only reflect those of the market as a whole. Consequently, in the CAPM formula, It would involves that for a diversified-enough portfolio: β = 1 so Re = Rm
Investors want to value companies before making investment decisions.
A typical way to do so is to use the Discounted Cash Flow (DCF) method:
See also: Prospect theory, disposition effect, heuristic, framing, mental accounting, Home bias, representativeness, conservatism, availability, greater fool theory, self attribution theory, anchoring, ambiguity aversion, winner's curse, managerial miscalibration and misconception, Equity premium puzzle, market anomalies, excess volatility, Bubbles, herding, limited liabilities, Fama French three 3 factors model.
. I predict and hypothesize that every actor/trader has Unique Trading Identity and therefore Individual Trading Behaviour in the real-time interaction with the financial market. This behaviour, and emotional state (somatic marker) are mapped and manifest it in these real-time (Time Stamped) trading patterns flows. This Individual Trading Behaviour can be formalized and recognized as Trading „Fingerprint” (Trading Stamp).
This paper examines professional investors can apply the principles within and around Behavioural Finance to maximise investment skill and minimise any negative impact of behavioural bias.
DiscussionEconomic behavior is more complex than assumed by coDustiBuckner14
Discussion
Economic behavior is more complex than assumed by conventional economic theory. Political economy explains the functioning of government. Behavioral economics ties psychology into human behavior.
Economists assume that individuals make rational decisions. However real people are more complex.
Based on what you have learned in your assigned reading, answer the following questions in your initial post:
What are the human behaviors economists should observe when creating economic models? Example: people tend to find solutions that are good enough, but not the best solutions.
In your responses, comment on at least two of your peers’ posts and share example of how non-rational human behavior can change an economic outcome.
Post
Aleisha Pohlenz- Human behaviors have a large impact on decisions that are made even in business situations, but even more so when dealing with personal economic decisions. As the text states people are irrational (much of the time) - we make decisions based on emotions, passed experiences, strong beliefs/values and even "instinct", sometimes we even have a hard time accepting an outcome and learning from it. I think its also extremely important that many people (although we may not always see it or admit it) have a sense of entitlement - feeling entitled can impact decisions and responses to various situations.
Response –
Stacy Portmann - One of the human behaviors that stand out in my mind is the story of the prisoner’s dilemma. Self-interest and the ego motivate behavior and that self interest can result in unpredicted negative outcomes. From this week’s readings, we learned that real people are not always rational, yet economic models are based on rational predictions. Economists can create models, however how can an economic model account for human irrational behavior? Human thought processes like being over confident, placing too much weight on small number of vivid observations and reluctance to change their minds are human habits that are difficult to predict. (Manikw, 2021) Using myself as an example, sometimes I make an immediate on the spot financial decision, other times, I might take two years to make up my mind. This explains why I still don’t have curtains on some of my windows! Additionally, preference ordering and transitivity play a part in economic outcomes, as shown in the example in the reading on voting, where the median voter returns the outcome. Humans break agreements. Humans cheat. Humans are generous. Real people are just imperfect when it comes to decision making and reasoning. Economists need to account for human nature and behaviors when creating economic models.
Response -
...
The Psychology of Investing Understanding Behavioral FinanceCOIN STREET
Using behavioral finance, one can understand the psychology of investing. This understanding can be shaped from different perspectives. This is a result of varying instances, as per Coinstreet. The investment advisory platform considers stock market returns to form one such instance. As stock prices increase or decrease, different behaviors get triggered. Accordingly, investors plan their moves.
A Neuromarketing Study on Mongolian Consumers’ Buying Decision Process IJMREMJournal
There has been almost 20 years since science of marketing has developed in Mongolia and there has been
significant progress in acquiring and using it. Business companies’ leadership have become aware of the
importance of this science and see marketing as business philosophy and understand that analyzing the market,
business environment and conditions by consumers is the key to success. Today’s society demands from
marketing professionals’ delicacy and taking into account consumers’ needs and creating new needs and new
means of consumption. Main purpose of business entities is to be aware of consumer needs, to establish its
position on the market and to be successful. In order to provide consumers with the best products and keep them
at the center of their attention it is important to establish optimal ratio of marketing factors that would most
efficiently influence consumers with different behaviors.
Using behavioural science to get closer to the consumer.Ipsos France
Before psychologists and neuroscientists came onto the stage, Shakespeare’s Hamlet, Prince of Denmark was the best reference to understand our deep dislike of uncertainty and how it shapes our behaviour. Experimental psychology and more recently neuroscience have not replaced Hamlet but they have enriched our view of behaviour, especially behaviour within the context of uncertainty. They have also changed how we look at ourselves as consumers, shoppers, customers or citizens.
In this Ipsos Views paper, Pascal Bourgeat takes the helicopter view of behaviour to show that the lens we use is often out of focus and why. He then sets out to show a simpler and clearer view of how (economic) behaviour works from the overlap of various areas of behavioural science, and presents examples from different industry sectors. There is much to gain from having the right picture resolution when we set out to influence behaviour. For it is when we fit most closely around the way consumers, shoppers and customers ‘construct decisions’ that the creativity in our interventions, actions and campaigns is most effective.
Bridging the Gap between Psychology and Economics: The Role of Behavioral Fin...inventionjournals
This article is a descriptive presentation of how behavioral finance plays key role in providing insight into how individuals’ investment behavior typically deviates from traditional economic theories. The efficient market hypothesis (EMH) and capital asset pricing model (CAPM) theories have gained prominence in modern finance platform. The adequacy of these popular, rational-based behavior theories has however, remained skeptical among many scholars including Daniel Kahneman, Amos Tversky, and Richard H. Thaler. While the EMH and CAPM theories have contributed significantly to the investment world, some scholars contend the theories fail to fully explain certain inconsistent behaviors exhibited in the investment world. Behavioral finance is a new theory that attempts to fill the void between psychology and economics by providing a better understanding of investor behavior through the theories of psychology. Investment decisions are impacted by an array of irrational behavioral biases. The article identifies some finance and economic theory anomalies such as the January effect, equity premium puzzle, and others, which shift away from the traditional economic theories. Understanding these anomalies not only would assist individuals have a sense of how investors generally behave in the investment arena but also would help in efficient capital allocation.
DiscussionEconomic behavior is more complex than assumed by coDustiBuckner14
Discussion
Economic behavior is more complex than assumed by conventional economic theory. Political economy explains the functioning of government. Behavioral economics ties psychology into human behavior.
Economists assume that individuals make rational decisions. However real people are more complex.
Based on what you have learned in your assigned reading, answer the following questions in your initial post:
What are the human behaviors economists should observe when creating economic models? Example: people tend to find solutions that are good enough, but not the best solutions.
In your responses, comment on at least two of your peers’ posts and share example of how non-rational human behavior can change an economic outcome.
Post
Aleisha Pohlenz- Human behaviors have a large impact on decisions that are made even in business situations, but even more so when dealing with personal economic decisions. As the text states people are irrational (much of the time) - we make decisions based on emotions, passed experiences, strong beliefs/values and even "instinct", sometimes we even have a hard time accepting an outcome and learning from it. I think its also extremely important that many people (although we may not always see it or admit it) have a sense of entitlement - feeling entitled can impact decisions and responses to various situations.
Response –
Stacy Portmann - One of the human behaviors that stand out in my mind is the story of the prisoner’s dilemma. Self-interest and the ego motivate behavior and that self interest can result in unpredicted negative outcomes. From this week’s readings, we learned that real people are not always rational, yet economic models are based on rational predictions. Economists can create models, however how can an economic model account for human irrational behavior? Human thought processes like being over confident, placing too much weight on small number of vivid observations and reluctance to change their minds are human habits that are difficult to predict. (Manikw, 2021) Using myself as an example, sometimes I make an immediate on the spot financial decision, other times, I might take two years to make up my mind. This explains why I still don’t have curtains on some of my windows! Additionally, preference ordering and transitivity play a part in economic outcomes, as shown in the example in the reading on voting, where the median voter returns the outcome. Humans break agreements. Humans cheat. Humans are generous. Real people are just imperfect when it comes to decision making and reasoning. Economists need to account for human nature and behaviors when creating economic models.
Response -
...
The Psychology of Investing Understanding Behavioral FinanceCOIN STREET
Using behavioral finance, one can understand the psychology of investing. This understanding can be shaped from different perspectives. This is a result of varying instances, as per Coinstreet. The investment advisory platform considers stock market returns to form one such instance. As stock prices increase or decrease, different behaviors get triggered. Accordingly, investors plan their moves.
A Neuromarketing Study on Mongolian Consumers’ Buying Decision Process IJMREMJournal
There has been almost 20 years since science of marketing has developed in Mongolia and there has been
significant progress in acquiring and using it. Business companies’ leadership have become aware of the
importance of this science and see marketing as business philosophy and understand that analyzing the market,
business environment and conditions by consumers is the key to success. Today’s society demands from
marketing professionals’ delicacy and taking into account consumers’ needs and creating new needs and new
means of consumption. Main purpose of business entities is to be aware of consumer needs, to establish its
position on the market and to be successful. In order to provide consumers with the best products and keep them
at the center of their attention it is important to establish optimal ratio of marketing factors that would most
efficiently influence consumers with different behaviors.
Using behavioural science to get closer to the consumer.Ipsos France
Before psychologists and neuroscientists came onto the stage, Shakespeare’s Hamlet, Prince of Denmark was the best reference to understand our deep dislike of uncertainty and how it shapes our behaviour. Experimental psychology and more recently neuroscience have not replaced Hamlet but they have enriched our view of behaviour, especially behaviour within the context of uncertainty. They have also changed how we look at ourselves as consumers, shoppers, customers or citizens.
In this Ipsos Views paper, Pascal Bourgeat takes the helicopter view of behaviour to show that the lens we use is often out of focus and why. He then sets out to show a simpler and clearer view of how (economic) behaviour works from the overlap of various areas of behavioural science, and presents examples from different industry sectors. There is much to gain from having the right picture resolution when we set out to influence behaviour. For it is when we fit most closely around the way consumers, shoppers and customers ‘construct decisions’ that the creativity in our interventions, actions and campaigns is most effective.
Bridging the Gap between Psychology and Economics: The Role of Behavioral Fin...inventionjournals
This article is a descriptive presentation of how behavioral finance plays key role in providing insight into how individuals’ investment behavior typically deviates from traditional economic theories. The efficient market hypothesis (EMH) and capital asset pricing model (CAPM) theories have gained prominence in modern finance platform. The adequacy of these popular, rational-based behavior theories has however, remained skeptical among many scholars including Daniel Kahneman, Amos Tversky, and Richard H. Thaler. While the EMH and CAPM theories have contributed significantly to the investment world, some scholars contend the theories fail to fully explain certain inconsistent behaviors exhibited in the investment world. Behavioral finance is a new theory that attempts to fill the void between psychology and economics by providing a better understanding of investor behavior through the theories of psychology. Investment decisions are impacted by an array of irrational behavioral biases. The article identifies some finance and economic theory anomalies such as the January effect, equity premium puzzle, and others, which shift away from the traditional economic theories. Understanding these anomalies not only would assist individuals have a sense of how investors generally behave in the investment arena but also would help in efficient capital allocation.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
Empowering the Unbanked: The Vital Role of NBFCs in Promoting Financial Inclu...Vighnesh Shashtri
In India, financial inclusion remains a critical challenge, with a significant portion of the population still unbanked. Non-Banking Financial Companies (NBFCs) have emerged as key players in bridging this gap by providing financial services to those often overlooked by traditional banking institutions. This article delves into how NBFCs are fostering financial inclusion and empowering the unbanked.
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
how can i use my minded pi coins I need some funds.DOT TECH
If you are interested in selling your pi coins, i have a verified pi merchant, who buys pi coins and resell them to exchanges looking forward to hold till mainnet launch.
Because the core team has announced that pi network will not be doing any pre-sale. The only way exchanges like huobi, bitmart and hotbit can get pi is by buying from miners.
Now a merchant stands in between these exchanges and the miners. As a link to make transactions smooth. Because right now in the enclosed mainnet you can't sell pi coins your self. You need the help of a merchant,
i will leave the telegram contact of my personal pi merchant below. 👇 I and my friends has traded more than 3000pi coins with him successfully.
@Pi_vendor_247
Introduction to Indian Financial System ()Avanish Goel
The financial system of a country is an important tool for economic development of the country, as it helps in creation of wealth by linking savings with investments.
It facilitates the flow of funds form the households (savers) to business firms (investors) to aid in wealth creation and development of both the parties
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
how to sell pi coins at high rate quickly.DOT TECH
Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Card
Successful financial traders 8
1. Essay: Trading Personality on Face,
Individual Trading Behaviour and its Recognition,
Successfull Financial Trading „Fingerprint”
„Financial Mind-Brain Reading”.
Comments are Welcome!
dr.hegyesi@t-online.hu
lajos@drhegyesi.com
lajos.Hegyesi@t-online.hu
this version: May, 2018 .
2.
3. 1. I attempt to study the properties of a „simplified” (which is incredibly complex in reality) theoretical loop from financial market to
actors/traders and back to the financial market.
2. I predict and hypothesize that every actor/trader has Unique Trading Identity and therefore Individual Trading Behaviour in the real-
time interaction with the financial market. Decision making in real-time is a key part of trading. Real-time trading behaviour, and
emotional state (somatic marker) are mapped and manifest it in these „Time Stamped” trading patterns flows. This Individual Trading
Behaviour can be formalized and recognized as Trading „Fingerprint” (Trading Stamp).
3. My assumption is that this Individual Trading Behavior is an integrative paradigm, consisting of personal (e.g., personality traits,
risk intelligence, financial background, biological markers...), contextual variables (stocks/equity, bonds, forex, derivatives, physical
assets…) and emotional management (e.g. euphoria-panic, greed and fear) as well.
Bechara and Damasio (2004) have presented that emotions are important for rational decision making. Decision making requires
emotion related signals, somatic markers. Facial Surface Electromyography (fSEMG) is a new tool for „measuring” emotional
reaction.
All emotions can be seen as linear combination of two neurophysiology dimensions valence and arousal (Colibazzi et al., 2010).
Emotion States : Appendix.0.
4. Common experience suggests what Experimental Economics and Behavioural Trading confirms, that Traders do not decide
identically when faced with the same options, even when the circumstances of decisions with all relevant respects seem to remain the
same. The Actor’s behavior is, however, lawful and regular at a probabilistic level ( Paul W.Glimcher ).
4. Therefore an aggregate trading decision is a Subjective Probability Event representing Trader’s Trading Personality in that
dedicated moment.
The set of this dedicated trading decisions is the Trader’s Trading Fingerprint.
5. The Three Dimensional Trading „Fingerprint” Model is shown in Figure 1.,2., and 3.
( Anatomy of the Brain Appendix 1.)
This model describes the interrelations among:
- Financial Market Events ( Stimuli ),
- Individual Trading Behaviour (Buy/Sell/Hold) and,
- Emotions, Emotional Management, Gut feelings/reactions, behind simultaneously.
6. The financial system in this „simplified” model focus solely the process of individual decision making (e.g., manual
trading), without any computerized assistance.
7. Financial patterns proposed to analyze, are the patterns of „Pattern Day Traders”, making many rapid buy and sell
transactions in the same trading day, hoping to make small but consistent profit.
8. Ad. Financial Behavioural Biases : Hens and Bachmann: overconfidence, loss aversion, disposition effect, herding,…
Ad. Personality Traits: Big Five: openness to experience, consciousness, extroversion, agreeableness, neuroticism
Ad. Financial Personality Traits: The big spender, the futurist, the newbie, the experienced, the avoider
Ad. Financial Background: Age, wealth, marital status, financial literacy, profession, income
Ad. Biological Markers: Left hand: 2D,4D; Right hand: 2D,4D ; Facial masculinity, (testosterone-Appendix 2., cortisol)
Ad. Mean Resting Heart Rate : Lower Mean Resting Heart Rate (MRHR) is associated with lower ratings of Arousal and Riskier
Behavior, Faster Responses, Higher Impulsivity (Barbara Schmidt et al., 2014).
MRHR can be considered as Personality Trait (Barbara Schmidt et al., 2014)
Ad. Individual Somatic Markers: facial Surface Electromyography ( fSEMG), Heart Rate Variability (HRV), Skin Conductance
Responses (SCR), Pupil Dilation, Eye Tracking, ( Body Movement, Cutaneous Electrogastography )…,
Ad. Risk Type Compass : Risk Type Compass (Psychological Consultancy Ltd) is an instrument that assesses the different ways in
which individuals perceive risk. An individual’s Risk Type will give an indication of how an individual perceives risk, how much
uncertainty they can cope with, and how they will react when unexpected events or outcomes occur.
There are Eight Risk Types: Prudent, Wary, Intense, Excitable, Carefree, Adventurous, Composed, Deliberate.
9. A Tool for Inferring Emotional States on Financial Decision:
Facial Surface Electromyography (fSEMG)
Facial expression recognition system based on facial surface electromyography is a tool for „measuring” emotional reactions.
Studies have found that activity of the corrugator muscle, which lowers the eyebrow and is involved in producing frowns,
varies inversely with the emotional valence of presented stimuli and reports of mood state.
Activity of Zygomatic major muscle, which controls smiling, is said to be positively associated with positive emotional
stimuli and positive mood state.
Facial Surface EMG has been used as a technique to distinguish and track positive and negative emotional reactions to a
stimulus as they occur.
14. The Model is an Approach to Advance our Understanding of :
- The Nature of Emotions/Emotional Management vs. Trading Behaviours,
- Infering Emotional States on Face in Financial Decision,
- Trading Behaviour and Dealing with Uncertainty,
- Background of Highly Successful Traders and Emotional Personality/Personality Traits,
- Behavioural and Emotional Analysis of Losers vs. Winners in the Financial Markets
- Rational/Irrational Attitudes of Traders,
- Nature of High Frequency (noise/impulse) Trading,
- Mean Resting Heart Rate and Trading Personality Trait,
- Mean Resting Heart Rate and Riskier Trading Behaviour.
Lajos Hegyesi Ph.D.,( in Telecommunications )
16. The two pathways for managing emotional stimuli
Jason Williams, MD : THE MENTAL EDGE IN TRADING
Anatomy of the Brain
There are two main brain pathways, or circuits, that transmits and handle various stimuli. Humans generali use the indirect pathway
( Cortex ) to make important decisions. This indirect pathway is slow, but it is precise, in that the data can be carefully scrutinized
before being acted upon.
However, a lot of times this flow of emotional data gets „ short circuited” through the direct pathway, entirely bypassing the cortex.
Emotional stimuli automatically trigger responses with the cortex being totally left out. The result is a very fast response, based
largely on emotions and without much thought or logic going on.
Appendix 1.
17. Testosteron level
JOHN COATES : RISK-TAKING, GUT FEELINGS AND THE BIOLOGY OF BOOM AND BUST.
John Coates and his colleagues found that testosterone molecule
influences a trader’s prifitability.
Morning testosterone levels predict a trader’s afternoon profits. Each of
seventeen traders is listed along a bottom axis.
Lighter bars indicate the trader’s afternoon „Profit and Loss Statement”
(P&L), when his morning testosterone was low relative to his median
level during the study, darker bars when it was high.
Appendix 2.
