VIEWPOINTS OF A COMMODITY TRADER

If you don’t know who you are, the stock market is an expensive place to find out.  – ADAM SMITH, The Money Game

According to Ori and Rom Brafman in their book “Sway” the National Institutes of Health (NIH) conducted a rather interesting experiment. They gathered participants and placed them in a MRI like machine and gave them a computer monitor and a joystick. Then they played a game.

Every time a circle showed on the screen, and they zapped it, they would make money. They would earn $1 for a circle with a line through it, $5 for one with two lines through it etc. If squares appeared, they also had to be zapped, or otherwise they would lose a certain amount of money. Just like the circles made money, different type squares erased different amounts of money if not zapped. Finally triangles appeared, but they had no monetary consequence. The participants were shown a running tab of their earnings as they played. 

What was interesting is that every time a circle or square appeared (money made or lost), a region of the brain called the nucleus accumbens lit up. When the triangles appeared however, the region stayed quiet. This nucleus accumbens is the region of the brain that is associated with what scientist call the “pleasure center”.

Watching the Phillies win the World Series, opening up a Porsche on a winding road, or throwing dice in Vegas are a few things that stir up the pleasure center. On the other hand, a shot of tequila, or a line of cocaine will stir up the pleasure center.

The authors go on to say that the MRI studies surprised the researchers “because it revealed that the pleasure center is also where we react to financial compensation. And the more money there is on the line, the more the pleasure center lights up. A monetary reward is– biologically speaking- like a tiny line of cocaine”.

The moral of the story is to keep ourselves in check. Trade for dollar bills and not thrills….. or you may have a very expensive habit on your hands.

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Filed under: Favorites, Trading Psychology by Charles Maley
Tags: «brian - Ori Brafman - Rom Brafman - Sway - thrills - trading »