Dorn: Traders, Are You Falling in Love With Your Positions?

Every form of addiction is bad, no matter whether the narcotic be alcohol or morphine or idealism…Carl Gustav Jung (Swiss psychiatrist, psychologist and founder of the Analytic Psychology, 1875-1961

Falling in intense love is often associated with some aspect of threat, fear, worry or shared anxiety. In other words, sometimes smart neurons make dumb choices.

As early as 2000, scientists used brain imaging techniques to demonstrate what are believed to be the first pictures of “the brain in love.”

Broken Heart
iStockphoto
Broken Heart

Following up on this work, researchers conducted an experiment that contrasted attraction between the sexes in situations of safety versus fear.

They found that, under conditions of strong emotions such as fear and anxiety, the attraction was significantly greater than in safer, less emotionally-provoking situations

Years ago, I traveled a lot — a nine year gig that took me around the world way too many times for a total of over 1.5 million miles. On an approach to the Rome airport, something really bad happened to the airplane. I am not sure exactly what it was, but afterwards we found that that the tail of the plane had been damaged severely. There were people screaming, praying and chanting, fearing a crash and death to everyone. I looked at the man next to me, asked his name and country he was from. With total fear in his eyes and hands trembling, he told me his name was Jurgen and he was a Finnish scientist. I had never seen him before we boarded that plane. We threw our arms around each other and professed our love for each other. We held each other very tightly and I was in love with this man at the very time I believed I was crashing to my death. How totally ridiculous I felt after this was over, the plane landed (not without damage, but no one was killed) and Jurgen scurried away without looking back at me. I will never forget his face, the way we held each other and how much I loved him during those frightening moments that seemed to be an eternity.

In these situations, the brain pours out a variety chemicals (dopamine, serotonin, oxytocin, phenylethylamine and others) that bond total strangers to each other. This was not the first time this had happened to me and it likely won’t be the last. Smart neurons, dumb choices?

Everyone who trades knows the feelings that can come rushing in through the day. We have all felt the anxiety of seeing a position go against us, the agony of missing out, or the shame, frustration and regret that set in when we can no longer take the pain and have to sell at a loss.

A day of euphoria can be followed by a day of despair. Fear of missing out, anxiety about losing a position in which we believed, denial that we could possibly have been wrong about our choice of entry, elation when a trade goes well—these and many more examples bring to mind the ups, downs and all-arounds that happen in the markets and in life. In the words sung by the great Diana Ross, the markets have the ability to turn us “upside down, inside out and round and round!”

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Illustration by: Janice Dorn

Just as in the airplane situation, in trading, the primitive brain areas (rat brain, limbic brain) can take over completely, leaving the newer (cortical brain areas) shaking their heads and powerless to do anything.

The electrical and chemical impulses from the limbic rat brain completely overpower the rational new brain.

That inability to eat or sleep, the obsession with the beloved trades (especially those with high beta), the strange feeling of ennui which creeps in when the markets are not open, the search for excitement and something to do, going a little bit nutso or doing something wild and crazy” just for kicks”, sneaking a peak (multiple peaks) at the markets while working at another job, trading in the car at lunch hour, trading while driving (yes- people really do trade while driving!), constant preoccupation with the markets and trading to the exclusion of family and friends, etc. might be more than just normal curiosity about the beloved.

Are we traders having an affair with our positions in the markets? Are we all lucrephiliacs now? Is this true love? Is it addiction? Are we being seduced, teased, embraced and then abandoned? Are we in a large neurochemical sink where dopamine begets more dopamine and the chemistry of love and passion turns to the chemistry of addiction?

Have you heard about the latest 12 step group for compulsive traders?

It's called Trade On and On Anon…Anonymous

Thanks and Good Trading!

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Dr. Janice Dorn is a Ph.D. (Brain Anatomist) and M.D. (Board-Certified Psychiatrist and Addiction Psychiatrist) who actively trades, writes commentary on the financial markets and manages a subscription-based website. Dr. Dorn has been trading the gold futures markets full time since 1993. She has written over 1000 articles on trader and investor psychology, and mentored over 600 traders and investors. She writes on all aspects of trading psychology and provides a real-time trading service on her website: TheTradingDoctor.com.