Managing Greed and Fear

Catalog description

Rational and irrational behavior can lead to success and destruction when it comes to decision-making. The world of trading seems attractive and lucrative and while many believe that they can “beat the markets”, few believe that this can be done unless more risk is employed. In fact, many lose funds and end up blaming the market for substantial losses, but few understand how they work. Research has shown that the markets react to a number of different data points (e.g. earnings, interest rate announcements, economic data to name a few) however, most fail to realize that there are certain price targets that are magnets to heavy trading activity based on chart reading. This form of technical analysis employs the psychology of support and resistance pricing (i.e. fear and greed). While greed gives people hope in generating more income beyond their wildest dreams, the risks involved are enormous and the trades often result in failure. On the other hand, the fear of losing, keeps many out of trading various asset classes. Few understand the concept of inflation and how using “safe asset classes” are still losses (due to purchasing power) albeit smaller ones. This course will provide students with insight into how people behave irrationally and how they can avoid making similar mistakes. Prerequisites: MGMT 201 and BUAN 227 .