The thrill of the trade

Back at the turn of the millennium, scientists from Stanford University signed up 14 volunteers to have their brains scanned as they completed tasks where they could win or lose small amounts of money based on how well they performed.

Traditionally, economics had always assumed that humans only derive pleasure from money based on what they can buy with it.

But what Brian Knutson and Richard Peterson at Stanford found was that when the volunteers won money, the pleasure centres of the brain were activated. The same areas of the brain were lit up by the task, which in many ways mimics trading, as when a person sees a beautiful face.

“Why is trading so exciting? It is partly because of the way our brains are wired.”

We may like to think that trading is a wholly rational experience where we calmly evaluate positions, but many of us know that trading can be an emotional rollercoaster. It can be exciting, boring, anxiety inducing but most of all when it is going right, it can be immensely fun.

A survey of 150 traders by Exness found that nearly half (45%) of respondents said that they felt excited while they were trading, while just over a third (35%) said that they felt pleasure from their trading activities.

“You're only as good as your next game”

Keith Hackett, former English Premier League football referee on decision making under pressure

Insight fromKeith Hackett

Keith Hackett is a former English football referee who oversaw some of the biggest games of English football in the 1980s and early 90s. Much like trading, Hackett says the thrill and excitement of the job comes from the element of risk involved.

“You're only as good as your next game. Not the one that's gone,” says Hackett, who points out that there is the constant potential to make a game changing mistake that may be watched by millions.

He says to cope with that, referees need to be calm, confident and master their emotions - traits that can only be fostered through experience and a willingness to learn from mistakes.

“The very good referees make fewer mistakes, it’s as simple as that,” he says. “The main thing is concentration. You look at the very top referees and they're confident they have a calmness about them.”

But let’s not ignore the lows. Nearly a fifth (19%) of respondents said they felt bored when they traded. Similarly nearly a third (31%) said they felt negative emotions when they traded - frustration, self doubt or even fear. This was particularly true for respondents who relied on trading for a bigger slice of their income, most likely because it was more stressful having the pressure of relying on trading to pay the bills, rather than simply dabbling in the markets. 

Why is trading so exciting? It is partly because of the way our brains are wired. We get a hit of dopamine when our trades are on the up. The fact that our brains only periodically get that jolt of dopamine, combined with the risk that it could all go wrong, makes it doubly intoxicating for the brain. It is the same reason why top football strikers keep on playing even if they are having a dry patch - the jolt of pleasure of the ball hitting the back of a net can make up for months of not scoring.

“If you want to progress, you have to try to control your emotions”

Our emotions can play havoc with the way we trade, making us act impulsively, hesitate or cash out at the wrong time. Recognising the effect that our emotions have on how we trade is a key part of the job. 

Anastasiya Karlovich is a chess grandmaster who teaches her students to recognise their emotions during matches, so they can let them go and focus on the game. 

“If you want to progress, you have to try to control your emotions”, she says. “We try to recognise our emotions and accept them. It can be a big fight with yourself to calm yourself down and focus on the moves.” 

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The art of decision making: Three ways to be a better trader