ABSTRACT
This chapter focuses on the individual traders and specifically how these individuals are affected by moods and emotions in their trading behaviours. There is plenty of evidence that emotions are an important driver for individual traders’ decisions. Financial traders are often making decisions at great speed which involve very high stakes and in this sort of context hot, intuitive, automatic emotional systems are more likely to prevail over cold, reasoning, deliberative cognitive systems. The role of emotions in economic decision-making has been confirmed by other neuroscientific evidence which shows that emotional circuits in the brain operate in response to ambiguity and during learning/information processing. An overarching theme in studies of how emotions influence traders’ performance reflects the idea that cognition and emotions are interacting when we make financial decisions. The role of emotions in economic decision-making has also been confirmed by recent neuroscientific evidence showing that emotional circuits in the brain operate in response to ambiguity and during learning/information processing.
