Why Do Losing Traders Keep Losing?

Have you ever wondered that there are hundreds or maybe thousands of traders who have never been profitable but they still keep trading? They just don’t admit that there is something wrong in their approach and they should be working on improving that instead. It has actually got a lot to do with our brain, the way it is wired.

There was an experiment done, in which a monkey was given a reward whenever it performed a given task. Since the monkey was getting the reward every single time, it kept doing it.

In another case, the monkey stopped getting the reward, so it stopped doing the task completely because it knew that there was no reward involved now.

In another experiment, a monkey was given a reward on some random occasions. Do you know what happened??
They monkey still kept doing the task because it did not knew when he will get the reward and when he won’t… so he kept at it and did not stopped.

When we as traders, get a big financial reward, our brain releases a hormone, known as the  "Dopamine" .This is a feel good hormone and our brain literally craves for it. It is the same hormone which is released when we eat sugar, consume drugs or even gamble.

Since each and every trader at some point of time, would have got a huge profit. That huge profit and the dopamine released from it, has triggered your brain to crave for more as it felt very nice the first time it happened. To feel that same emotion again, traders tend to keep trading endlessly and mostly without a plan. They are so much glued to that same feeling that they want to experience it by hook or by crook.

That’s the reason traders blow up their capital but still keep trading, even by borrowing money from friends or financial institutions.  This could be very dangerous from the financial as well as the emotional aspect since we are always expecting the same result, when we don’t get it, not only are we deprived financially, we are even exhausted emotionally. A series of losses often leads to depression and traders quit their trading careers before they see any meaningful gains out of it.

It is always advisable to have a rational expectation from the markets and trade only according to the plan and not to focus on the result. When we shift our focus from the result to the plan, we tend to keep our emotions in control. This is easier said than done and needs a lot of practice and discipline but once we master it, we will see a significant improvement in our results and would feel much more relaxed.