As human beings, we are prone to bias against things that we perceive to be bad, or which go against our objectives. This is ingrained in all of us, and affects every area of our lives, including our work. In trading, that can mean the difference between a successful or unsuccessful investment, but there is software that can help you minimise the impact of human bias in trading.
Human Bias in Trading Is Real…
‘Emotion has a substantial influence on the cognitive processes in humans, including perception, attention, learning, memory, reasoning, and problem solving,’ write four academics in this paper published in the PubMed Central. ‘Emotion has a particularly strong influence on attention, especially modulating the selectivity of attention as well as motivating action and behavior.’
What this means for traders is that our decisions, while they may be done in good faith, may not always be what’s best for our portfolio. In fact, between elements of investor fear and greed, we may be missing out on some golden investment opportunities.
…But Technology Is Here to Save The Day!
If you’re a CEO reading this, you may wonder how your employees’, or even your own, bias may be affecting your investment, but the reality is that this is difficult to calculate. Therefore, we suggest focusing on fixing the problem, with the solution being adequate software that can easily get all the information needed to support your decision-making process.
A computer and its CPU have no emotions: rather than make decisions that stem from emotions, they do exactly what they are coded to do based on the facts presented to them. This type of software works on algorithms based on your pre-defined investment goals and comparisons, and helps stem out a part of that cognitive bias that will still be somewhat ingrained into the coded program (humans programme it after all!).
This will help you reduce your risk of investor greed and fear, which affect your trading whether you know it or not, and help you base your strategy squarely on the numbers that you are being presented with.
This Reduces Human Bias in Trading, But Technology Isn’t Infallible, Is It?
We hear you, and no, technology isn’t infallible.
As we have seen through the case of the FTX fraud, software can be manipulated, resulting in a complete break-down of the system. But with today’s technology, this also makes it the software’s fault for failing to check and control that all was running properly and according to the initial goals set out by its makers.
In other words, technology is now advanced enough that it allows us to design it in a way that it can monitor itself, which with the help of human beings can provide far more security and consistency than any of us ever could.
Don’t Underestimate the Benefits of Technology in Finances
As a team of financial and technological experts, we can assure you that the biggest problem we see with technology is that many people underestimate its benefits, particularly when it comes to financial SMEs.
The right financial software can help you:
- Measure Trading Efficiency
- Automate Market Analyses
- Achieve Unified and Cleaner Financial Data
- And lots more!
To do this and to help you reduce your proneness to errors, it’s necessary to have software that is designed around your needs and to your specifications. And this is what we do by helping you identify your perception bias and risks, as well as to mitigate them.
So, what are you waiting for? Get in touch with us to find out how we could help you.