Archives of “Brain” tag

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What's Your Trading Brain Type?

  
  Education
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BRAIN123Five Types

To summarize, there are five general brain types. Among traders and investors, the three most important brain types are Compulsive, Impulsive and Anxious.

People with Compulsive Brains tend to get stuck in a particular thought about the market. “It’s too high.” “It’s too manipulated.” “It’s too risky.” It’s too…” whatever. People with Compulsive Brains tend to operate entirely on their own terms and are generally not open to feedback or other options.  

People with Impulsive Brains are the exact opposite. They are unpredictable and lack impulse control in trading/investing and in daily life. Without much discipline, they start many more projects than they finish. They live for creativity and for what’s possible.

People with Anxious Brains live with a rain cloud overhead.  They pay more attention to the obstacles to their own success (or the success of others) than to the ways that something might work. They don’t like to try new things and don’t appreciate novelty. (more…)

Three Motivations for Traders

  
  Education
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There are three motivations behind taking a trade: monetary reward, educational reward, and/or psychological reward. The first pays the bills, the second will pay the bills, and the last will prevent you from paying the bills.

Whenever I feel the pull of psychological reward, I have the voice saying “do you want to be a trader?” Letting go of the psychological need to take a trade or be right, is hard. Our brain does not know what money is. It listens in terms of chemical releases. Letting go of psychological reward is not easy. It is the most instantaneous form of reward.

The best way I know to give psychological power to money is to make a habit of seeing money as opportunity. Opportunity for financial freedom and opportunity to make another trade. The brain understands opportunity. This needs to be in balance as well.

If you are feeling the psychological pull, take a few seconds and answer the following.

Do I want to be a trader?
Did my last trade affect the thought process in an irrational way for this trade? (Need to be right, need to make my money back, I am invincible, etc.)
Can I get a better price or is this my best opportunity?
Am I seeing the whole picture?
As always, am I willing to accept the consequences of my action or inaction?

A battle against human survival instinct

  
  Education
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battleTrading is a battle against human survival instinct.
It takes a long time to have a person’s brain rewire to the point where trying to survive doesn’t override what that person does during the middle of it when the heat gets turned up. Everyone loses accounts their first year, many will lose accounts next years, no matter how well they were consistently doing demo trading because when emotions start happening it literally stops a person from being able to press the button out of pure fear.

3 destructive habits every trader must avoid.

  
Analysis, Education
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Three destructive habits that will kill your trading day, week, month, or career.

Not having a plan. Get a plan, who cares if it is bad, start with something. You can build off of it and refine it. You have to be willing to spend the time to make the plan yours. You do not start anything without some level of planning. Trading is hard; your brain spends a lot of time in fast forward, affecting your memory. You can slow it down by having a plan and increase your brains ability to remember.  A plan makes it possible to improve. Most importantly, a plan gives you a chance at removing emotion.

Forgetting why you are trading.  The purpose of trading is to make money.  Every action should bend to that goal. That does not mean every trade makes money.  It means every trade gets to closer. If you are looking for comfort, get a teddy bear. If you are looking to be right, play trivial pursuit.  If you want excitement, drive fast.

Letting it go. It is really important to separate what happened from how you felt. The more distance between the two the less time it takes to learn from that situation.  Admitting you made a mistake or are wrong are necessary for letting it go.  Unlike life, you get no credit for admitting you are wrong, it is just a part of trading. Neither matter unless you take action.

The Secret

  
  Education
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FireWalkWhat’s the secret of successful traders and how did they make the transition from clueless learner to consistent pro?When the same tools are available to anyone, why do some people out perform others?

 

The successful traders have discovered The Secret.

 

It is not the latest indicator, program or hot tipster. It is something that everyone has inside them already.

 

The Secret is believing in your method and trading it. Believing to the point of having it ingrained into your brain so that it becomes as automatic as breathing. If the charts do this, then I will do that. Trading your plan means cutting losers, riding winners, managing money and risk well. When you arrive at the point of realizing that your self-discipline can only get you so far and that the next step should be reflex trading then you will have found The Secret.

 

Having to exercise self- discipline to me means that there is still something inside you that you must fight to control. If emotions are still in control of your trading then you must find a way to turn that fear and greed into a move productive energy. Trading your method as a reflex means that there is no struggle to control wayward thoughts. (more…)

Implicit memory and Decisions

  
  Education
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brain_power_bigImplicit memory is comprised of unconscious emotional patterns of relating to ourselves and others. It’s the kind of memory you access without thinking. It’s what makes you feel characteristically you.

These are the types of behavioural patterns laid down implicitly in the brain:

How do you feel about yourself?

Are you good at self-care? Do you accept all aspects of your personality? Or do you tend to deny yourself, or verbally beat yourself up?

How are you with others?

Do you naturally gravitate towards others and enjoy their company? Or do you prefer being on your own?

Implicit memory guides our behavior automatically, without thought or effort. You can think of implicit memory as a set of instructions or procedures encoded in the brain. However, a procedure can’t easily be described in words or contained in images. These procedures are nonconscious and nonverbal. (more…)

This explains almost everything…

  
  Education
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Are we addicted to being right? Is being thought of as being right more important to us than actually being right?

You tell me…

From the Harvard Business Review:

In situations of high stress, fear or distrust, the hormone and neurotransmitter cortisol floods the brain. Executive functions that help us with advanced thought processes like strategy, trust building, and compassion shut down. And the amygdala, our instinctive brain, takes over. The body makes a chemical choice about how best to protect itself — in this case from the shame and loss of power associated with being wrong — and as a result is unable to regulate its emotions or handle the gaps between expectations and reality. So we default to one of four responses: fight (keep arguing the point), flight (revert to, and hide behind, group consensus), freeze (disengage from the argument by shutting up) or appease (make nice with your adversary by simply agreeing with him).

All are harmful because they prevent the honest and productive sharing of information and opinion. But, as a consultant who has spent decades working with executives on their communication skills, I can tell you that the fight response is by far the most damaging to work relationships. It is also, unfortunately, the most common.

What Stays Behind Your Intuition As A Trader

  
  Education
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There are about 7 billion people currently living on the Earth. Each and every single one of us has a different perspective regarding anyone and anything. Do you know why? Because everyone has slightly different past experiences and the way we see the world is determined by our memories. Without them, we don’t have a basis to compare to and without a basis to compare, we are lost. We don’t know how to feel. We perceive through association. We associate based on something already experienced.

I distinguish two types of intuition – inherent and acquired. Inherent is the one you were born with and it is the end product of hundreds of thousands of years of evolution aka trying to survive in the fields. We are wired to seek instant gratification without a deeper thought about the future consequences, we are loss averse and stubborn.Intuition

While the inherent (core) intuition is the pre-installed software, each and everyone of us is born with, the acquired intuition is the upgrade we get through life as it is based on everything we experienced. Your brain remembers everything, even if you don’t realize it. Of course you can easily recall only the most vivid memories as depending on your everyday activity the brain has prioritized what is important and what is not. (more…)

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