Social Mood
A relatively new social science, called behavioral finance, attempts to analyze why people do what they do when it comes to money. Why does an otherwise rational person make choices to earn small, more likely amounts of money instead of taking only slightly higher risks for much higher rewards? Why is it so hard to let profitable trades run and so hard to cut losing trades for minimal losses? After all, this is one of the most cherished maxims on Wall Street, yet most investors take lots of small profits and refuse to sell losers rather than the other way around.
Universities are now tackling this subject with research and for-credit courses, so we’ll leave this topic right here. It does fall beyond the scope of an introductory technical ...
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