Fear and Greed in Financial Markets: A Clinical Study of Day-Traders
Read the paperopens www.nber.org in a new tab
What they found
The authors ran a five-week study of 80 day traders enrolled in an online training program, collecting daily emotional-state surveys alongside their trading results. Traders whose emotional reactions to gains and losses were most intense had significantly worse trading performance, while traders who reported less emotional reaction did better. There was no evidence that a particular personality type (extraversion, openness, and so on) made someone a better trader; what mattered was emotional reactivity.
What you can use
- Traders who felt their wins and losses most strongly performed worst; emotional regulation predicted results better than personality.
- The goal is not to feel nothing, but to keep emotional swings from changing your decisions.
- Journaling your emotional state alongside your trades is a research-supported practice, not a self-help cliche.
Caveats
Small sample (80 traders) over five weeks in an educational program, with self-reported emotions. Correlational, not causal.
Tags: behavioral, emotions, day-trading, psychology
Summaries are our own reading of the paper, not the authors' words. Educational only, not advice. Discuss it in Book Club.