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Creating the Right Environment to Beat our Dopamine Induced Risk Addiction

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The famous British Economist John Maynard Keynes made a remarkably insightful observation, “It is a characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation”.

The neuroscientist community have helped us understand this on a deeper level by revealing how the human body secretes more dopamine (happy drug) when faced with the uncertainty of rewards when performing novel activities, such as trading. In other words traders taking bigger bets in the hope of spectacular uncertain returns is simply a narrative for the bodies natural craving for a “hit” of dopamine.

We can take the dismissive approach of most addicts and say that we do not suffer from this malaise or we can seek to understand the cause of our behaviour and try find ways to address the problem. It is early in the year and therefore cause for optimism, not the pessimistic fatalistic idea that being slaves to our biology suggests. However, our job at PsyQuation is to help foster optimism with deeper knowledge and practical solutions that inevitably lead to greater profitability.

In the 1970’s in Vancouver a researcher by the name of Bruce Alexander decided to question the ideas around addiction, his experiment became famously known at the “Rat Park”. In his study he gave rats the opportunity to drink from 2 bottles, the one was plain water, the other was water laced with morphine. As one would expect the rats soon became addicted to drinking the morphine laced water. Then Bruce introduced rats to his “Rat Park” with all its foliage and exercise equipment not to mention the social scene with male and female rats to hang out with. What is interesting is that in this environment the rats were able to avoid becoming addicted to the morphine water, as they were able to produce sufficient dopamine levels through their “normal” daily routine in the more interesting productive environment.

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The “Rat Park” is analogous to the environment/ecosystem PsyQuation wishes to create for its traders. The sooner we can recognise that the trading environment is heavily loaded with land-mine’s, both internal and external, designed to blow up our trading accounts; the more likely we are to take preventative action to avoid these pitfalls. The PsyQuation ecosystem is designed to be Bruce Alexanders’ Rat Park to allow you to trade with enough healthy dopamine that you do not need to look for disaster laced dopamine in the name of excess leverage and frequency of trading.

Performance Perspective Learning from our Mistakes - Antifragile