Behavioral finance in the CIT’s trading training course

The human threat to the market’s well being is taken seriously at the CIT, which employs specialized researchers in its Research Center. The CITRD’s regularly published reports are used firstly in the construction of programs of trading psychology modules, such as stress management and competition management. These courses represent an important part of the CIT’s training course. In effect, when CIT students to finish the program with a good experience, it can be assumed that they went through a certain amount of pressure in the process. We do admit a certain level of separation in performance between training and entry into the ‘real world’ of trading, because of natural development of coping techniques, which are presented in further detail below. Different courses in human science at the CIT founded on research are here to prepare students for possible problems. It’s a new era in market finance as detailed in our recent publications.

Behavioral Finance: a recent addition to trading research

Finance is marked by a history of hard hits (the crash of Wall Street in 1929, the crisis in 1973, the recent subprime crisis…). We believe today that these crises had, above all, a human origin, and psychological effects, such as cognitive and emotional behavior, played an important role as the market turned. Even if these crises could not have been avoided, the reduction of emotional reactions in trading would have certainly reduced their impact. This theory, explained by one of our researchers, that markets are perfectly efficient, is in radical opposition of those common in the 2000s.

Behavioral finance, which is very similar to behavioral economics, is the science of humans in finance, and works to limit the effects of Traders’ idiosyncrasies on the market. As well as the study

Today, backed by the Nobel Prize in Economy, behavioral finance is focusing on factors that influence humans and the market around them: the weather, vacation time, etc. Stakeholders, such as the Parisian analysis office 2Bremans, work in this field to regulate the negative effects of such deviations.

Behavioral finance works therefore to reduce deviancies in behavior and their consequences on the market. ….

Dangerous behaviors in a trading room are diverse :

  • Automatic reflexes that can lead to recklessness
  • Emotional difficulties, often in comparison with others: feelings of superiority, admiration, fear…
  • Social mimicry, for example the development of purchasing habits caused by the influence of a large number of people who act similarly
  • Submission to the influence of others

 

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