Duration Disparity in Losing versus Winning Forex Trades: Evidence from Individual Traders' Behavior
Duration Disparity in Losing versus Winning Forex Trades: Evidence from Individual Traders' Behavior

Summary/Abstract: This paper delves into the realm of behavioural finance, drawing upon the existing academic litera-ture, research studies, and laboratory experiments to underscore the impact of psychological biaseson decision-making processes. However, empirical investigations pertaining to trading behaviour,particularly in the context of an escalating number of individual traders, remain scarce. To addressthis gap, the present study examines a substantial dataset comprising foreign exchange transactionsexecuted by Bulgarian individual traders over a five-year period. Consequently, this study employsthe principles and tools of behavioural finance to scrutinize the extensive trading dataset, aimingto provide empirical support for the composite and intricate effects of the loss aversion bias, sta-tus quo, endowment effect, and loss attention biases on Forex traders’ decision-making and theirsubsequent trading outcomes and returns. Specifically, the research centres on the analysis of timeduration disparities between winning and losing trades, elucidating the interrelationship betweenthese ratios and the trading performance of Bulgarian individual Forex traders. To the best of theauthor’s knowledge, the investigation into the time duration of winning and losing trades representsa novel addition to existing trading statistical ratios, serving as a means to substantiate and interpretthe psychological influences on individual traders’ trading outcomes. This pioneering research buildsupon two prior behavioural finance studies conducted by the author and an fMRI study exploringdistinct patterns of brain activation in response to real and hypothetical monetary outcomes.

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