A recent survey commissioned by London-headquartered City Index, a multi-asset financial services provider, delves into the trading psychology of new traders, and how emotional trading can be overcome for improved results.

A survey commissioned by City Index reveals that more than one in three traders surveyed feel frustration and disappointment as a reaction to losses in trading.

One in five of the respondents will re-evaluate and adjust their trading strategy to avoid similar losses in the future, it shows.

City Index commissioned the survey of 3,000 participants to delve deeper into the trading psychology of new traders between 23 November and 4 December 2023.

It reveals that those most likely to have their trading decisions consistently influenced by emotions were 41 to 60-year-olds (Gen X), with this sentiment selected by over a third of this demographic (35.4 per cent). In comparison, 10.1 per cent of 18 to 24-year-olds surveyed considered emotions to be a significant factor in their trading approach.

The age group most likely to engage in risk-taking was those aged 61 and above, with almost a third saying they do so to recover losses quickly (31.4 per cent).

There has been an increasing number of studies linked to the area of behavioural finance in recent years. For instance, Oxford Risk's behavioural tools analyse investors’ financial personalities and preferences as well as changes in their financial circumstances which, supplemented with other behavioural information and demographics, enables them to build a picture of client suitability.

“Market participants frequently grapple with the repercussions of negative emotions, such as fear and greed. These emotions can distort rational decision-making by activating the amygdala, prompting impulsive actions and clouding judgement during periods of market volatility,” James Roy, neuro expert at Brainworks Neurotherapy, said. â€śRecognising and managing these emotional triggers is imperative for traders seeking to navigate the complexities of financial markets. Strategies that integrate emotional intelligence can help mitigate the impact of negative emotions, fostering a more rational and deliberate decision-making process.”

“Emotions and biases are powerful influences on trading, but most traders are unaware of how much it impacts their performance,” Matt Weller, head of market research at City Index, said.  

“A supporting and psychology-driven tool such as Performance Analytics utilises realistic goal setting, live discipline tracking, and psychological insights to help you overcome emotional trading. Performance Analytics is a digital mentor which arms you with the right tools to achieve all three, so you can trade with confidence,” Weller added.