Monday, July 13, 2009
10:52 am - Market Outlook by Bill Wermine
Dear Traders,
Last week, I shared some research on Dopamine by Dr Dorn, a psychaitrist and trader from Arizona. www.thetradingdoctor.com.
Dopamine is the chemical that is released in our brain when our greed is stimulated
Dopamine is a powerful drug perhaps like cocaine and we need to be awaire of its dangers and affects that can cause us to lose our reason and lose our money in the markets. It can cause us to buy the high because of greed.
This week will share Dr Dorn's research on Serotonin, the fear chemical. Our brain releases this chemical when we experience fear- it is so powerful that it can cause us to panic and sell at the low. If we have a period of losses it can cause us to withdraw from the market into a shell and we miss good trades because we are afraid to pull the trigger.
I am not a medical professional but I know this is true because I have suffered the effects of these powerful chemicals. Through long and costly experience, I have found ways to overcome the problems of dopamine and serotonin and I share with you that having a trading plan and a mechanical system with fixed backtested rules are 2 ways. Maintaining your good health by diet, exercise and taking frequent holidays is another.
Below is Dr Dorns answer to me and her research. If you have any psychological issues you should subscibe to her service.
as trading in my opinion is 90 % psychology. Her website is below. If you wish me to send you the attachments supporting her research please let me know.
Serotonin is a chemical whose levels in the brain are decreased in the presence of depression. Studies have shown low levels of serotonin in people who are suicidal or who have committed suicide. In other words, in the presence of low serotonin, people tend to retreat. They become either depressed or anxious or both. Small stimuli are magnified and there is a general sense that something is not right and that an otherwise-innocuous stimulus is something to be feared.
VERY very simply—the way that serotonin decreases in the brain is this: Ordinarily serotonin is released at nerve endings in parts of the rat brain and also in other parts of the brain. Brain cells communicate electrochemically. The first attachment shows a two nerve cells—a sender and a receiver. The serotonin is relapsed into the space between the nerve cells. This space is called a synapse as shown in the second attachment. There are as many synapses in the brain as stars in the known universe, so showing just one is pretty simple—but you get the point!)
In a normally-functioning brain, t serotonin released into the synapse by the sending neuron, taken up by the receiving adjacent nerve cell and the transmission continues. This serotonin transmission from sender to receiver ensures a high degree of “normal” mood control.
When something happens ( say loss of money, death of a loved one or something related to loss), the serotonin from the sender sell does NOT get taken up into the receiver cell. Instead, it get taken up by the sender cell! In other words, there is serotonin “reuptake” by the sender cell and the receiver cell never gets the message. Smooth transmission along serotonin nerve cells stops. Depression, sadness, anxiety and fear results from this. It is a failure of what is called “serotonin reuptake.” Many medications prescribed for depression ( Prozac, Paxil, other anti-depressants) are called SSRIs. This means that they are :Selective Serotonin Reuptake Blockers. In other words, they prevent the REUPTAKE of serotonin by the sender cell, and allow the serotonin to get into the synapse, be taken up by the receiver cell and the smooth transmission to proceed.
Also, it is good to know that the majority of both dopamine and serotonin transmitting neural nets are in the primitive rat brain and its connections. Additionally, we believe there are more than 300 brain chemicals ( so-called neurotransmitters) so serotonin and dopamine, although the best studied so far, may be just the tip of the iceberg re: mood control by our most powerful trading tool—the human brain!
So- in the presence of fear, anxiety or depression, serotonin transmission essentially crashes. To make matters worse, it is believed that the dopamine transmission also crashes—a double whammy as it were!IF you would like me to expand on this further, or to write something special for your group, please let me know, Bill?Otherwise, please feel free to use this with a mention of me and my site: www.thetradingdoctor.com.
The KLSE has been resilient in the face of a 10 % drop in the Dow and the onslaught of bad news, pessimism and currency volatility. What is Malaysia doing right that the US is not doing ? Obviously, large funds such as Aberdeen Asset Mgt and Fidelity who are slowly moving into the KLSE must know something that the crowd of pessimists and doom sayers do not know.
Continue to focus on only the highest quality blue chip dividend shares and carefully manage your risks on these positions.
We recently took profit on all our F & N positions and I plan to reestablish should supports be tested. I like their dividendand that stimulates my Dopamine. By the way it is OK to be greedy but manage your positions.
Avoid all speculative shares that have risen quickly in the last 2 months. I know the media has been hyping many lower quality shares lately as smart money is offloading their low quality inventory to the sheep. Remember the media is the tool of the smart money. In the US it is CNBC and CNN. - Jim Cramer is like the hungry wolf who leads the crowd of retail sheep traders to the slaughter house.
Have a prosporous week,
Bill
Last week, I shared some research on Dopamine by Dr Dorn, a psychaitrist and trader from Arizona. www.thetradingdoctor.com.
Dopamine is the chemical that is released in our brain when our greed is stimulated
Dopamine is a powerful drug perhaps like cocaine and we need to be awaire of its dangers and affects that can cause us to lose our reason and lose our money in the markets. It can cause us to buy the high because of greed.
This week will share Dr Dorn's research on Serotonin, the fear chemical. Our brain releases this chemical when we experience fear- it is so powerful that it can cause us to panic and sell at the low. If we have a period of losses it can cause us to withdraw from the market into a shell and we miss good trades because we are afraid to pull the trigger.
I am not a medical professional but I know this is true because I have suffered the effects of these powerful chemicals. Through long and costly experience, I have found ways to overcome the problems of dopamine and serotonin and I share with you that having a trading plan and a mechanical system with fixed backtested rules are 2 ways. Maintaining your good health by diet, exercise and taking frequent holidays is another.
Below is Dr Dorns answer to me and her research. If you have any psychological issues you should subscibe to her service.
as trading in my opinion is 90 % psychology. Her website is below. If you wish me to send you the attachments supporting her research please let me know.
Serotonin is a chemical whose levels in the brain are decreased in the presence of depression. Studies have shown low levels of serotonin in people who are suicidal or who have committed suicide. In other words, in the presence of low serotonin, people tend to retreat. They become either depressed or anxious or both. Small stimuli are magnified and there is a general sense that something is not right and that an otherwise-innocuous stimulus is something to be feared.
VERY very simply—the way that serotonin decreases in the brain is this: Ordinarily serotonin is released at nerve endings in parts of the rat brain and also in other parts of the brain. Brain cells communicate electrochemically. The first attachment shows a two nerve cells—a sender and a receiver. The serotonin is relapsed into the space between the nerve cells. This space is called a synapse as shown in the second attachment. There are as many synapses in the brain as stars in the known universe, so showing just one is pretty simple—but you get the point!)
In a normally-functioning brain, t serotonin released into the synapse by the sending neuron, taken up by the receiving adjacent nerve cell and the transmission continues. This serotonin transmission from sender to receiver ensures a high degree of “normal” mood control.
When something happens ( say loss of money, death of a loved one or something related to loss), the serotonin from the sender sell does NOT get taken up into the receiver cell. Instead, it get taken up by the sender cell! In other words, there is serotonin “reuptake” by the sender cell and the receiver cell never gets the message. Smooth transmission along serotonin nerve cells stops. Depression, sadness, anxiety and fear results from this. It is a failure of what is called “serotonin reuptake.” Many medications prescribed for depression ( Prozac, Paxil, other anti-depressants) are called SSRIs. This means that they are :Selective Serotonin Reuptake Blockers. In other words, they prevent the REUPTAKE of serotonin by the sender cell, and allow the serotonin to get into the synapse, be taken up by the receiver cell and the smooth transmission to proceed.
Also, it is good to know that the majority of both dopamine and serotonin transmitting neural nets are in the primitive rat brain and its connections. Additionally, we believe there are more than 300 brain chemicals ( so-called neurotransmitters) so serotonin and dopamine, although the best studied so far, may be just the tip of the iceberg re: mood control by our most powerful trading tool—the human brain!
So- in the presence of fear, anxiety or depression, serotonin transmission essentially crashes. To make matters worse, it is believed that the dopamine transmission also crashes—a double whammy as it were!IF you would like me to expand on this further, or to write something special for your group, please let me know, Bill?Otherwise, please feel free to use this with a mention of me and my site: www.thetradingdoctor.com.
The KLSE has been resilient in the face of a 10 % drop in the Dow and the onslaught of bad news, pessimism and currency volatility. What is Malaysia doing right that the US is not doing ? Obviously, large funds such as Aberdeen Asset Mgt and Fidelity who are slowly moving into the KLSE must know something that the crowd of pessimists and doom sayers do not know.
Continue to focus on only the highest quality blue chip dividend shares and carefully manage your risks on these positions.
We recently took profit on all our F & N positions and I plan to reestablish should supports be tested. I like their dividendand that stimulates my Dopamine. By the way it is OK to be greedy but manage your positions.
Avoid all speculative shares that have risen quickly in the last 2 months. I know the media has been hyping many lower quality shares lately as smart money is offloading their low quality inventory to the sheep. Remember the media is the tool of the smart money. In the US it is CNBC and CNN. - Jim Cramer is like the hungry wolf who leads the crowd of retail sheep traders to the slaughter house.
Have a prosporous week,
Bill
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