The Authority’ on Price Action Trading. In 2016, Nial won the Million Dollar Trader Competition. Essentially, what you need to do since you cannot upload a new program like Neo and become part robot, is train yourself to use your more advanced and more highly-evolved thinking abilities so that the more primal brain processes do not take over and ruin your trading. First, you must understand these two brain systems: Our brains are composed of different pieces that serve different purposes. Some of the pieces serve our more primal needs, like telling us we need food, love and other rewarding activities.
Those are the oldest pieces of our brain, and they also are the ones that get first crack at most decisions, which is not always good for trading purposes. As traders, it’s critical that we learn how to use both brain functions in conjunction to achieve optimal outcomes. How the New Science of Neuroeconomics Can Help Make You Rich: The Reflexive brain system are the older pieces of the brain I was referring to above. The reflexive system works so fast that you often finish responding before the conscious part of your brain realizes that there was anything to respond to!
An example of this is swerving to avoid a hazard on the highway before you could even identify what it was. So, the reflexive system is all about emotion and intuition. Which, I am not saying is ALL bad, indeed, I’ve written articles on using a trader’s intuition. And as we will see later, one of the keys to trading success is learning how and when to use your reflexive trading intuition, and when not to. The Reflective brain systems are like the counterweight to the reflexive system. Is my investment portfolio sufficiently well-diversified? What should I get my wife for our anniversary?
Too much of anything is bad for you As the saying goes, too much of anything is bad for you. When it comes to your brain and trading, using the reflexive side too much OR the reflective side too much can lead you down a path of consistent losses. When it comes to the reflective brain system, you might think that too much of it couldn’t be bad, right? Although doctors get a bad rap as investors, in my experience engineers are worse. That may be because they are trained to calculate and measure every possible variable.