If you've ever wondered why bulls charge when they see red, the answer is they don't.
Bulls are actually red-green colorblind, and they charge because they're irritated
by the cape's movement, not its color.
Matadors don't use red capes for the bull it's red for us.
The red hides the splatters of blood, which may be too hard for the audience to stomach.
Since the 1700s, red has been a symbol for the bull's anger.
Color is a language soaked in moods and meanings: for example, in Western culture, red is bloodlust,
heat, and passion.
Green is life, luck, and wealth.
Blue is sky, sea, serenity but also melancholy.
Sometimes we're aware of these associations, but sometimes color unwittingly affects us.
Red, in particular, can trick our brains and has even been shown to affect performance:
subjects solved anagrams more slowly when they were shown on red backgrounds versus
blue backgrounds.
In the Athens Olympics, boxing, Taekwon-Do, Greco-Roman wrestling, and freestyle wrestling
competitors were assigned a random uniform color: red or blue.
Those wearing red were significantly more likely to win their event.
Psychologists believe that because anger can sometimes redden skin due to increased blood
flow, humans have evolved to associate red with aggression, so athletes wearing red may
seem more intimidating.
But just as red may intimidate a boxer, it can also intimidate investors.
Imagine you're shown a stock chart in green and red.
If you're like most people, the stock shown in red will appear to be performing worse even
if the price change is identical.
Multiple studies have shown that when information is presented in red, investors are more pessimistic
about a stock's future performance and less likely to take a risk.
But there are some investors who are immune to this color bias.
Researchers have looked specifically at Chinese investors, due to their different cultural
associations with the color red.
In China, red is lucky: according to legend, every New Year, a beast named Nian would terrorize
villagers, eating crops and children.
But Nian's one weakness was fear of the color red, so villagers hung red lanterns,
and today, during Lunar New Year's, Chinese people exchange hongbao: lucky red envelopes
filled with money.
Chinese stock exchanges display rising prices in red and falling prices in green.
Perhaps because of this, when Chinese stockbrokers were shown the color red, they performed better
on IQ tests.
There's one more group of investors who isn't susceptible to the color bias.
If you see the number 29 here, you probably have normal color vision.
But if you don't, you may have a red-green color vision deficiency.
One study confirmed that the color red didn't have an effect on color-deficient investors.
If you're not color deficient, one way to remove color bias from your trading is to
simply switch the settings on your trading platform to black and white.
But if you don't want to rely solely on your eyeballs to tell you which direction
a stock is moving, you can learn tools to help you better identify trends.
Technical indicators, which are graphical representations of stock data based on a specific
formula, may offer a more objective way to examine a stock's performance over time.
Sometimes it can be difficult to tell which direction a stock is actually moving.
To confirm its trend, you could look at an indicator called the simple moving average,
or SMA, which shows the stock's average price over a period of time.
If a stock's 50-day SMA crosses below its 200-day SMA, many investors see this as a
death crossťan indicator of recent poor performance that could potentially continue
long term.
There are many more technical indicators that reveal information about a stock's price
and volume.
Looking for multiple data points may help investors make more informed decisions.
You don't have to let the color red scare you away from buying stocks.
Just because you're not colorblind like a bull doesn't mean you can't be bullish.