The Trading Trance, is a natural state for male traders due to evolutionary tendencies, but is made worse by Aversive Conditioning & Random Rewards.
Women tend to be better traders than men. Why? Trading brings out the stalker/hunter instinct in men.
Over several million years as nomadic hunters, males evolved a neurological system that produced a trance-like state of pleasurable anticipation.
This stalking state of mind relies on the feel-good neurotransmitter dopamine to motivate hunters and helped them endure the arduous process.
Research shows that more dopamine is secreted by the brain in anticipation of reward than when the reward actually arrives. Since ancient hunters prized the Big Kill, because it would feed the tribe for a month or more, male traders also tend to fantasize about big wins, which also increases dopamine levels.
Dopamine is a powerful mind-altering compound. Consequently, it is also implicated in the addictive and entrancing aspects of trading (“dope-a-me”).
A dopamine high provides powerful psychic energy, but also causes various negative attentional and behavioral consequences for traders.
When a trader is immersed in the trading trance, he becomes focused on the future, not on the present. He has a vivid picture in his mind of the immensely satisfying goal just ahead. This is a dangerous mindset because it makes it less likely that traders will recognize when the market is moving against their dream.
Entranced traders become less sensitive to the pain of loss in the here and now, which means they will tend to ignore risk and minimize the real-time negative consequences of their behavior.
Dopamine energizes the mind, so it can also drive traders to overtrade, track too many targets, put in too much screen time, sleep less, stress out more.
Roller coaster Trading
A dopamine surge is naturally followed by dopamine depletion, so some traders alternate between periods of over-confidence and depression. If so, trading becomes highly dramatized. One may feel on the verge of greatness and shortly thereafter hopeless and ready to give up.
Male susceptibility to the Trading Trance is one of the least appreciated aspects of trading psychology. One needs to trade in the more ordinary reality known as the Here & Now in order to make rational decisions and take money out of the market.
For a sustainable career as a professional trader, it is vitally necessary to become disenchanted with the market and “de-tranced.” You know you are there when you can be satisfied with hitting modest but consistent daily or weekly goals. Nothing is more important than becoming proactive about your mental-emotional state while trading. It could save you thousands!
Until next time,
Dr. Kenneth Reid holds a Ph.D. in Clinical Psychology. He is currently a trading coach and has published articles for Forbes, SmartMoney, and SFO Magazine. He has also appeared on CNBC and writes a column on The Trading Psychology for Trader Planet. Kenneth Specialized in trading stock and futures and is working on a futures trading book.