Homosapiens, monkeys, GFC, trading...

An interesting insight into human being's biases that will usually stop aspiring individuals succeding at trading or the financial markets...

There are two evolutionary biases common to humans and monkeys, risk aversion and loss aversion. Risk aversion means that given a choice between a safe option (extra $500) and a risky option (a risky bet to risk 1000 to get another 1000) subjects tend to take the easy option. In trading then once a trade goes into profit, the tendency os to take profit quickly and not let the trade run.

The other is loss aversion, which means the subjects hate losses, because they keep thinking in relative terms, eg on where they bought a stock at, and now it has fallen and in a loss situation. They tend to take the more risky situation in the decision tree, ie average the trade down in the hope for a rebound, in order to mitigate the loss, which they hate.