This article examines the basic concepts of behavioral finance and analyzes the effect of investor psychology on the dynamics of the financial markets. Traditional financial theories assume that investors are rational decision makers and evaluate all information optimally (Fama, 1970). However, the studies conducted since the 1970s have shown that individuals act with systematic cognitive prejudices and deviate from rationality in decision -making processes (Kahneman & Tversky, 1979; Thaler, 1993). At this point, behavioral finance comes into play and combines the disciplines of psychology and economy and modeling investor behaviors in a more realistic way. In this context, the study; Experts the effects of cognitive errors on investment decisions such as excessive trust, herd psychology, framing effect, avoidance of loss and prejudice; He argues that these effects lead to anomalies such as balloons, panic and irrational pricing in the markets. In addition, it is emphasized that behavioral prejudices have a wide range of influence from individual investors to institutional actors and that portfolio management and financial counseling should be taken into consideration. As a result, this study reveals that psychological factors are too important in understanding market behavior and optimizing investment decisions.