Tuesday, April 5, 2011

Psychologists destroy money in the name of science

BPS Research Digest: Psychologists destroy money in the name of science:

 "Compared with the other video clips, the sight of bank notes being destroyed led to increased activation in brain regions previously associated with looking at, identifying and using tools - that is, the left fusiform gyrus and the left posterior precuneus. This activation was greater when it was higher value notes being destroyed. Participants also said they felt more aroused and less comfortable when watching the money being destroyed than when watching the other videos."

Its hard wired in us to be less comfortable when we lose money so as traders its important to cut losses quickly, understand that you will lose money, and that if you have a true edge in the market you ought to make money in the market over the long run.  Psychology and risk management are VERY important.  Remember you can't mange your profit; you can only manage your risk.

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