- Our brains are designed to perceive trends.
- If a trend repeats a natural chemical called dopamine is released causing the soft euphoria feeling.
- If a stock goes up a few times in a row your brain chemistry changes giving you a “natural high.”
- You effectively become addicted to your own predictions.
- A financial loss fires up your amygdala—the part of the brain that processes fear and anxiety.
- Psychologists have shown that the pain of financial loss is 2x as intense as an equivalent gain.
- Losing money is so painful that many people sell out near the bottom or refuse to buy more.
- Explains why we fixate on the raw magnitude of a market decline and forget to put the loss in proportion.
–Intelligent Investor, Benjamin Graham & Jason Zweig