from a CNBC guest blog …scroll down the the part where it says this -“2. These are trading markets where the ability to execute without emotion is the key to success.”
I realize that neuroeconomics is a new field and that the word hasn’t gotten out yet but all facts of today’s latest science points to one of those truths we all know if we just stop and think. No human does anything without at least some emotion. We don’t get a glass of water without WANTING one and what is “wanting”?
In fact Seo and Barrett’s 2007 study showed that indeed being emotional and knowing it created the best investment performances out of a group of 20 active investors (traders) over a 100 day period.
Most of the problem lies in the reality that most traders and investors spend so much time trying NOT to be emotional that they lose the focus, insight and wisdom their emotions can provide…
And remember that emotion is a feeling – much like gut instinct is a feeling. Even when we choose variables for a quantitative model of investing (theoretically the most rational one) we do so with some feeling about why those variables are best.
Forgive me for the rant but in these markets, where clearly the feelings of fear interact with the fundamentals to create NEW fundamentals and new fear… the professional investing and trading community (even if no one else) desperately needs to understand the reality of how the human brain evaluates, decides and acts.
Attempting to do so without emotion only asks us humans to turn into computers and
1) it isn’t going to happen.
2) it is about the quickest way to send an emotion under-ground and into direct action via a hasty buy or sell that is later a source of regret… particularly on the advice of an expert (neuroeconomic reality).