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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.
Loss Aversion and Chemical Transmitters
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 ...
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