There is an old saying pertaining to trading “the bull climbs the stairs and the bear jumps out of the window”. While avid traders may be familiar with this, certain scientists of an unexpected field of science actually specialize in its deeper understanding. ‘Fight or flight’ response has been studied extensively by evolutionary biologists. In this article, say HI to your “FOMO” and “FUD” feelings originating deep inside your mind, selected by evolution over millions of years.
Trading is a life-long learning experience and adventure. Seasoned trader veterans often emphasize on how to work around your in-built first instincts, which is the greatest skill one has to master; requiring practical experience over classroom knowledge. Often what is not well understood is why this skill is so difficult to learn and master in the first place. Decades of research work point out to the fact that these trading skills require one to overcome ‘default’ urges dictated by our brain. The ‘fight or flight’ has helped in survival of our species for millions of years. It manifests itself in our body by sudden burst of chemical neurotransmitters in the brain, even influencing the body. It is thus no easy task to master the default feelings that can grip a trader during wild swings. A Nobel prize in economics was awarded in 2002 to a psychologist Daniel Kahneman for connecting these dots. “Thinking, Fast & Slow” is a good read by Mr. Kahneman for any beginners out there.
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