Mindset / Financial Psychology

Financial psychology is a relatively young branch of psychology. She researches how people behave when dealing with money or money-related products and experience this.

In the financial sector, the research area of ​​Behavorial Finance has stood out. This research area originated in the USA in the early 1980s. Behavorial Finance combines traditional economic research methods with specialist knowledge of psychology. The research results of behavioral finance can help private investors and professionals to better understand their real motives for investment decisions in the speculative capital market. They make it clear which thought and behavior patterns the actors mostly act on. 

Behavioral finance assumes that investors act illogically mainly because of unconscious behavior. A well-known proposition goes like this: “If you want to be smarter than the market, you have already lost. Anyone who is aware of their irrational behavior has a chance. ” 

The important economic theorist John Maynard Keynes described in 1936 in his main work “The General Theory of Employment, Interest and Money” that stock market events do not arise exclusively through rational behavior. 

Economists Daniel Kahneman and Arnos Tversky realized that people usually don’t like risk – unless they’re about to lose. Then they love risk. This “Prospect Theory” by Kahneman and Tversky, which forms the basis of modern finance, was awarded the Nobel Prize for Economics in 2002. In the following years, Richard Thaler, Hersh Shefrin and Robert Shiller in particular provided further in-depth knowledge in the field of behavioral economics, Terence Odean and Martin Weber.


Another important finding of behavioral finance research is that speculatively oriented traders are consciously or unconsciously guided primarily by their emotions. This inevitably leads to (wrong) decisions. Typical feelings are fear of losing money when things go bad and greed for more money when things go well.

Humans have the urge to use their knowledge to control what is happening. But that is precisely what is not possible on the speculative capital market, because the course of stock exchange prices is uncontrollable.

The only thing the investor can control is the implementation of a rule based strategy, such as: those of the seasonal patterns from Strategies


What is clear, however, is that the main reason for success in stock market trading is on the mental side.