The third in the short series of posts related to Psychology in the markets addresses the Behaviourist School.
There are a number of cutting edge contemporary angles that I am not willing to address in this post due to isolationist reasons but below are details of a couple of approaches by this school of thought.
1) Magical Thinking - Traders tend to believe that certain behaviour produces a required effect even when they are aware that there are no cause and effect linkages.
2) Prospect Theory - Operators have an irrational tendency to be less willing to gamble with profits compared to losses.
For further details on Behaviourism, we would advise that you check out the academic literature.
