Behavioral finance principles are relevant in currency trading from "summary" of International Money and Finance by Michael Melvin
Behavioral finance principles provide valuable insights into the behavior of market participants, including currency traders. These principles acknowledge that traders are not always rational and objective in their decision-making processes. Instead, emotions, biases, and cognitive errors can influence their actions. In currency trading, these behavioral tendencies can lead to market inefficiencies and price distortions. For example, traders may exhibit herd behavior, following the actions of others without conducting their own analysis. This can create momentum in the market, driving prices away from their fundamental valu...
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