Inside the Trader's Mind: Evidence on the Perception–Behavior Gap in Individual Trading

Do active private traders act on emotion more than they recognize? In order to understand more about this issue, we try to understand more about loss-recovery impulses among online traders. In our online survey among traders, we found that plan-incongruent and affect-consistent behaviors were common. Roughly four-fifths of the 103 respondents reported taking a “loss-recovery” trade to win back a prior loss, and similar shares reported trading against prior analysis, acting on emotion, or being influenced by peers. However, respondents nevertheless considered themselves rather rational, and a large majority believed that other traders are emotion-driven. We term this divergence between self-conception and reported behavior as the emotion–control gap. The pattern aligns with Prospect Theory, dual-process accounts of hot-state overrides, and social-influence mechanisms, and suggests practical avenues for trader education and platform design.