Affordable Access

Publisher Website

Professional trader discipline and trade disposition

Authors
Journal
Journal of Financial Economics
0304-405X
Publisher
Elsevier
Publication Date
Volume
76
Issue
2
Identifiers
DOI: 10.1016/j.jfineco.2004.01.004
Keywords
  • Behavioral Finance
  • Discipline
  • Futures Markets
  • Microstructure
  • Trading

Abstract

Abstract Recent evidence indicates irrational behavior among retail investors. They hold onto losses and sell winners in a manner consistent with the disposition effect. Market professionals often use the term “discipline” to indicate trading strategies that minimize potential behavioral influences. We investigate the nature of trading discipline and whether professional traders are able to avoid the costly irrational behaviors found in retail populations. The full-time traders in our sample hold onto losses significantly longer than gains, but we find no evidence of costs associated with this behavior. The successful floor futures traders in our sample exhibit trading behavior characterized as rational and disciplined. Moreover, measures of relative trading discipline have predictive power for subsequent trading success.

There are no comments yet on this publication. Be the first to share your thoughts.

Statistics

Seen <100 times
0 Comments

More articles like this

An Indian trader

Jan 01, 1934

Mas Trader

May 01, 1986

Professional Traders as Intuitive Bayesians

on Organizational Behavior and Hu... Jan 01, 1995
More articles like this..