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TRADING EMOTIONS IN DAY TRADING: EXPERIMENTAL EVIDENCE ON THE SYNERGY BETWEEN HUMANS AND TRADING ROBOTS
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1  Department of Economics, Management, Industrial Engineering and Tourism, University of Aveiro, Aveiro, 3810-193, Portugal
Academic Editor: Xianrong (Shawn) Zheng

Abstract:

Traders do not trade with markets but with their perceptions and beliefs. There is a growing recognition of behavioral biases' impact on financial decision-making. However, in day trading, a significant gap remains in the literature regarding the psychological and operational implications of trading robots on human traders, which this study seeks to fill. The aim was to investigate the extent to which trading robots can mitigate behavioral biases and provide a more rational market view. An experiment was conducted on the Brazilian stock exchange (B3) with 130 human traders and trading robots in real time, aiming to understand the relationship between traders' rational intention to buy or sell and their emotional capacity to execute these actions. This research introduces the concept of Psychological Distance and explores how trading robots bridge the gap between rational decision-making and emotional execution, reducing psychological barriers that compromise financial performance. The results demonstrate that trading robots can reduce behavioral biases such as greed and impulsiveness, promoting more rational decision-making and improved financial outcomes. Robots are particularly effective at eliminating profit-related biases, reducing human emotional interference in trading. However, their effectiveness is limited when it comes to mitigating loss aversion, highlighting the complexity of emotional responses, especially in managing financial losses. These insights reveal the potential and limits of automated trading systems in improving traders' performance. By reducing emotional biases and fostering disciplined decision-making, trading robots help traders optimize their strategies. This study advances behavioral finance and trading automation, supporting future innovations in trading psychology and algorithmic assistance.

Keywords: Financial Market, Day Trading, Emotional Biases, Trading Robots, Experimental Economics
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