Traders and Their Theories
Traders and Their Theories
Professional traders in financial markets are generally aware of the finance theory that uses powerful analytical tools to model the operations of financial markets and the set of practitioner theories that describe trading strategies that may result in large profits. This chapter examines the relationship between the general theories of the market and the specific theories that traders use through explaining the following: the behaviours of individuals in the market and how these behaviours have effects on the aggregate, the properties of these individual theories, the notions of intuition, reflexivity, and the emergence of contrarian beliefs, noise trading, and the relationship between formal theories and the theories that are actually applied in the market.
Keywords: finance theory, practitioner theories, individual behaviours, intuition, reflexivity, contrarian beliefs, noise trading
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