In 2007, the Chairwoman of Qantas, Mrs Margaret Jackson, was supportive of a takeover bid for Qantas at $5.45 per share. With acceptances of the offer waning, Mrs Jackson told the Australian Financial Review regarding the impending withdrawal of the bid, “If anyone thinks this will happen without affecting the (share) price then they have a mental problem with how the market works.” She received sharp criticism for her comments, especially from the mental health community. In addition, she was accused of underestimating the abilities of the shareholder, many of which were retail investors, to make a rational decision. By late 2013, Qantas (QAN) shares hit a record low of 96 cents.

Had Mrs Jackson suggested that those shareholders who failed to accept the takeover offer were subject to several cognitive biases including the Status Quo Bias, and the Endowment Effect, she may have escaped the criticism, even if few people understood what she was referring to.

Sadly, the term “Mental” has been hijacked in popular parlance to represent a slur on a person’s character, and is short for mentally ill. However, its original meaning refers to things of the mind, specifically intellectual (cognitive) and emotional.

During this session, Paul will demonstrate that all aspects of trading can be affected by cognitive biases in two key parts.

• How we trade; including mechanical versus discretionary trading, decision making and risk management.
• Why and what markets we trade, which trading platform / software we use, which instruments we trade with, which broker we use, and our approach to financial education and training.

Key to the presentation will be an attempt to model the cognitive biases together to demonstrate those we are susceptible to at each stage of the trade, rather than viewing them as distinct phenomenon as is typically the case.

Of course, options trading will be a key part of the discussion. Paul will suggest that the first trade any new trader should make is a long call.

Paul will demonstrate to the audience that trading is completely mental! Be prepared for a fun, interactive and informative session.