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Neuroplasticity: Your Brain and Your Trading – #AnirudhSethi

Neuroplasticity – HOPES Huntington's Disease InformationIn Neuroplasticity: Your Brain and Your Trading, we will explore how Neuroplasticity can help traders create a more accurate trading system. Neuroplastic is the ability of your brain to adapt to its surroundings and change through experience. Neuroplasticity is an exciting new area of research in which scientists are studying the ways that our brains change over time with various types of input.

Mental training has been shown to be a powerful tool in improving performance on tasks from memory recall, math calculations, motor skills, creativity, decision-making, and many others. Neuroscientists have found that mental training increases gray matter volume in specific areas of the brain responsible for those skills.

 

##What is neuroplasticity and how does it affect trading?:

 

In the world of neuroscience, babies are like sponges. They process data twice as fast and their brain is still developing due to new neural connections that form in response to stimuli. The thing about brains—they can adapt! Imagine what it would be like if your left speech center was damaged after an accident or stroke; you could learn how to use your right side instead because they’re always adapting with time (talk about a tough feat).

Your brain is more awesome than we even thought: not only does it have all this processing power but also some cells called “mirror neurons” which help us understand other people’s actions by simulating them ourselves–in short, mirror neurons make imitation easy for our children while giving adults empathy skill.

The conventional wisdom once said that we could never recover from the loss of brain cells, but now research has shown that you can grow new ones. For instance, if a senior is injured or ill they will experience significant changes to their neural pathways in response and this makes up for lost neurons by creating more connections between healthy neurons so everything can be sorted out again! (more…)

Should You Trust Your Trading Intuition?

I’ve heard from many traders that they often take decisions based on instincts. Actually, all non-quants use intuition in some form or another. If you are not using a program that takes all signals that your system produces, how do you decide between several equally good looking trading setups with similar risk to reward? Do you take them all or do you concentrate on only a few? The odds are that you are doing the latter and your ultimate choice for capital allocation is subconscious.

Even though we are defined by our decisions, we are often completely unaware of what’s happening inside our heads during the decision-making process.
Feelings are often an accurate shortcut, a concise expression of decades’ worth of experience.
The process of thinking requires feeling, for feelings are what let us understand all the information that we can’t directly comprehend. Reason without emotion is impotent.
This is an essential aspect of decision-making. If we can’t incorporate the lessons of the past into our future decisions, then we’re destined to endlessly repeat our mistakes.

Nothing can replace personal experience: (more…)

Gut Feelings

 We’re all quantitative traders, but we still have gut feelings. The body has a self awareness of its internal conditions. The stomach has more bacteria than human cells. The stomach has more seratonin receptors than the brain. When nervous you can feel the butterflies. You get gut feelings about things that govern conscious decisions. I have a theory that dreams are the sleeping brain receiving feelings from the body and stomach during the night. Gut feelings are distinct from the amygdalian flight impulses. I’ve never heard of any studies or information about gut feelings other than anecdotes. How often has a gut feeling saved you, or how often does it lead to wrong decisions?

Dr. Janice Dorn a former list member, wrote a book, in which she and her co-author argue that your gut feeling is not programmed for market risk, but market risk will give your gut the opposite reaction than you should take. When I tried trading the stronger my gut was scared the more I knew I should trade and vice-a-versa the more passive I was about my position the more I knew I should be out. Rather than honing in on this “skill”, I would suggest a more palatable method, nerves were my undoing as a day trader. I suspect Dr. Brett S. would say something similar.

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