Orbex Website uses cookies, by continue browsing you agree to and accept Our Cookies Policy. For more info click here
My Orbex
December 26, 2021 by admin
Trading requires much thought and attention. But did you know that our brain processes wins and losses differently and responds strongly to certain situations? Powerful reactions take place within certain areas of the brain – so let’s find out more about what happens during an unsuccessful trading session.
In 1979, psychologists Amos Tversky and Daniel Kahneman developed the Prospect Theory to help explain how people react to risks and uncertainties. This behavioral economic theory was based on the principles of loss aversion, which states that human beings are generally risk-averse. Losses have a more significant psychological impact on us than gains. This is because reward centers in the brain get silenced when losses are expected and are activated when gains are on the horizon.
Neurotransmitters are the chemical messengers of the brain. One neurotransmitter, norepinephrine, is critical in shaping our responses. People with low norepinephrine levels tend to be less sensitive to the pain of losing money. Similarly, those who have higher levels of these transmitters, show greater loss aversion. They are more sensitive to losses.
Interestingly, people who react strongly to gains in the ventromedial prefrontal cortex of the brain, pay more attention to monetary amounts. Those who have shown sensitivity to losses in the ventral striatum region, on the other hand, pay more attention to probabilities or risk processing.
Another theory suggests that losses may trigger more significant activity in the brain regions associated with registering emotions and decision makings, such as the insula and amygdala. These regions are also associated with pain processing. So, there is a biological justification for human beings being loss averse in general. After all, no one wants to lose money, or experience pain, for that matter.
The brain can be divided into two parts – the reflective system and the reflexive system. The reflexive part is associated with emotional responses, while the reflective part is analytical and logical. For traders, it is a constant struggle to strike a balance between these two systems. Being too analytical is also not helpful, given how quickly market conditions change.
It is also important to consider that our brain is a muscle. The more we use a particular brain pathway, by learning a trading strategy or using a specific indicator, the stronger it becomes. Strong neural pathways are great for constructive activities but can be a hindrance if you repeat a mistake again and again. So, if you continue to pick the top of an uptrend or get stuck in “overtrading” activities, your brain will not let you escape unless you make a conscious effort to do so and this can be challenging. As all seasoned traders know, adapting your strategy with the view of limiting your losses is an essential part of the trading process and should not be ignored.
By remaining aware of our responses to certain situations, we can not only identify patterns but can also work consciously on changing unhelpful responses.
Orbex Global Limited is authorized and regulated by Mauritius Financial Services Commission “FSC” (View License), with registered address: Ground Floor, The Catalyst, Silicon Avenue, 40 Cybercity, 72201 Ebène, Republic of Mauritius.
Orbex Limited, Seychelles Company, registered under number 8429881-1 and regulated by the Seychelles Financial Services Authority (FSA) under Securities Dealer’s License number SD110 . The registered office is at 9A CT House, 2nd floor, Providence, Mahe, Seychelles.
Orbex.com is owned by Orbex Services Limited and is operated by Orbex Global Limited.
Orbex LTD – incorporated in Saint Vincent & the Grenadines under number 24885 IBC 2018) whose registered office is at First Floor, First St Vincent Bank LTD Building , James Street , Kingstown
The Comision National del Mercado de Valores (CNMV) has determined that Forex/CFDs are not appropriate for retail clients residing in Spain due to their complexity and high risk.
Orbex.com is operated by Orbex LLC, a company incorporated under the laws of SVG with the registration number (230 LLC 2019) and registered address at First ST Vincent Bank LTD Building, James Street, Kingstown, St. Vincent and the Grenadines.. Orbex Services LTD, registration number (HE 387329) , a company organized and existing under the laws of Cyprus, whose registered office is at Kato Polemidia, Limaasol, Cyprus ; a payment operator of Orbex LLC., by the laws of Cyprus acting as an agent on behalf of Orbex LLC.
Risk Warning: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. There is a possibility that you may sustain a loss of some or all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Orbex does not offer its services to residents of certain jurisdictions such as the USA, Iran, North Korea, Indonesia, Mauritius, and Romania.
© 2024. All rights reserved