Interesting link that is written to investors, but I think definitely applies to traders as well:
http://articles.moneycentral.msn.com/Investing/StartInvesting/11WaysWallStreetBrainwashesYou.aspx
It talks about some, 11 I guess to be exact, of the common psychological barriers that the market throws at us. There's a video in there but I haven't watched it.
11 ways Wall Street brainwashes you
We all like to think of ourselves as the masters of our thoughts, but our brains work in ways that leave us vulnerable to being duped, even when we know it's happening.
Latest Market Update
July 17, 2008 -- 14:05 ET
Yes, Wall Street's got a great con game going, but it works only because its 95 million investors are willing victims who love playing along, actually letting Wall Street get away with it.
I call it "Brainwashing 101 for Dummies." Insiders use fancier terms, such as neuroeconomics, behavioral finance and the science of irrationality.
Regardless of what you call it, you're being brainwashed. Wall Street's laughing all the way to the bank at how easy it is to dupe gullible investors. But I've got the 11 rules of Brainwashing 101 for Dummies for you -- everything you need to know about the big con.
A little history first, though. True story: The new science of neuroeconomics began on Dec. 21, 1954, the day Marian Keech, the leader of the Brotherhood of the Seven Rays, a UFO cult, predicted a massive flood would destroy Earth. Keech received messages from the Guardians on planet Clarion. Their spaceships would come and save her true believers.
No surprise: No flood and no alien spaceships. And no admission from Keech that she was wrong. Just the opposite. One source wrote that Keech was "elated" and that she told how she'd received "a telepathic message from the Guardians saying that her group of followers had spread so much light with their unflagging faith that God had spared the world from the cataclysm."
In "Buying In," Rob Walker's book on neuromarketing, we learn that psychologist Leon Festinger had predicted Keech's bizarre claim. She "had invented, on an unconscious level, a rationale for their behavior that justified it despite clearly contradictory evidence."
Our brains: Our worst enemies?
Clever! But it's not just Keech. Everybody's brain operates on a preprogrammed guidance system. We create subconscious "rationales" so compelling that facts that contradict them are usually rejected. Our brains dismiss new information that doesn't fit neatly into our ideas of reality. Or we block new stuff, not even really seeing it. Or, as Keech did, our all-to-clever brains will reinterpret contradictory data to fit into our old belief systems.
And that, my friends, was the birth of neuroeconomics, showing that the investor's brain is easy to brainwash. Our heads can be our worst enemies, saboteurs tenaciously holding on to old ideas no matter how destructive to our economic interests.
Festinger labeled Keech's behavior "cognitive dissonance." And it works because, as Walker succinctly puts it, "The vast majority of our brain's activities -- 98% of it, by one estimate -- happens outside of conscious awareness." In other words, investors are easy-to-manipulate zombies.
Here's how that translates into Wall Street's new Brainwashing 101 for Dummies: Virtually all so-called rational decisions are made in the investor's subconscious mind. You do not think rationally. Instead, you are guided by rationales, including your beliefs, ideologies and principles.
Recently I reread "Why Smart People Make Big Money Mistakes," in which Gary Belsky and Tom Gilovich lay out 10 simple principles. "Big Money Mistakes" is one of the best early books describing neuroeconomics for a popular audience. Way back in 1999, hidden in plain sight -- in a book intended to help America's investors understand their brains and thus make more rational investments -- was the big secret Wall Street needed to get richer.
What a lethal weapon! Belsky and Gilovich were handing Wall Street what the Pentagon calls a "psych-ops" war strategy. The authors had provided a 10-part profile of the brains of the 95 million investors playing the stock market. Now Wall Street's quants could develop esoteric algorithms to brainwash and manipulate Main Street investors.
Yes, folks, investors are still like Keech's seekers, still willingly playing Wall Street's game by Wall Street's rules, making Wall Street richer. That's Brainwashing 101, and here are 11 reasons you willingly let them take advantage of you:
1. You know you're (almost) never wrong.
"Big Mistakes" calls it "confirmation bias," another name for cognitive dissonance, the unconscious need your brain has to stick with what you already know as The Truth (even when it's been secretly planted there by Wall Street's clever ad campaigns).
http://articles.moneycentral.msn.com/Investing/StartInvesting/11WaysWallStreetBrainwashesYou.aspx
It talks about some, 11 I guess to be exact, of the common psychological barriers that the market throws at us. There's a video in there but I haven't watched it.
11 ways Wall Street brainwashes you
We all like to think of ourselves as the masters of our thoughts, but our brains work in ways that leave us vulnerable to being duped, even when we know it's happening.
Latest Market Update
July 17, 2008 -- 14:05 ET
Yes, Wall Street's got a great con game going, but it works only because its 95 million investors are willing victims who love playing along, actually letting Wall Street get away with it.
I call it "Brainwashing 101 for Dummies." Insiders use fancier terms, such as neuroeconomics, behavioral finance and the science of irrationality.
Regardless of what you call it, you're being brainwashed. Wall Street's laughing all the way to the bank at how easy it is to dupe gullible investors. But I've got the 11 rules of Brainwashing 101 for Dummies for you -- everything you need to know about the big con.
A little history first, though. True story: The new science of neuroeconomics began on Dec. 21, 1954, the day Marian Keech, the leader of the Brotherhood of the Seven Rays, a UFO cult, predicted a massive flood would destroy Earth. Keech received messages from the Guardians on planet Clarion. Their spaceships would come and save her true believers.
No surprise: No flood and no alien spaceships. And no admission from Keech that she was wrong. Just the opposite. One source wrote that Keech was "elated" and that she told how she'd received "a telepathic message from the Guardians saying that her group of followers had spread so much light with their unflagging faith that God had spared the world from the cataclysm."
In "Buying In," Rob Walker's book on neuromarketing, we learn that psychologist Leon Festinger had predicted Keech's bizarre claim. She "had invented, on an unconscious level, a rationale for their behavior that justified it despite clearly contradictory evidence."
Our brains: Our worst enemies?
Clever! But it's not just Keech. Everybody's brain operates on a preprogrammed guidance system. We create subconscious "rationales" so compelling that facts that contradict them are usually rejected. Our brains dismiss new information that doesn't fit neatly into our ideas of reality. Or we block new stuff, not even really seeing it. Or, as Keech did, our all-to-clever brains will reinterpret contradictory data to fit into our old belief systems.
And that, my friends, was the birth of neuroeconomics, showing that the investor's brain is easy to brainwash. Our heads can be our worst enemies, saboteurs tenaciously holding on to old ideas no matter how destructive to our economic interests.
Festinger labeled Keech's behavior "cognitive dissonance." And it works because, as Walker succinctly puts it, "The vast majority of our brain's activities -- 98% of it, by one estimate -- happens outside of conscious awareness." In other words, investors are easy-to-manipulate zombies.
Here's how that translates into Wall Street's new Brainwashing 101 for Dummies: Virtually all so-called rational decisions are made in the investor's subconscious mind. You do not think rationally. Instead, you are guided by rationales, including your beliefs, ideologies and principles.
Recently I reread "Why Smart People Make Big Money Mistakes," in which Gary Belsky and Tom Gilovich lay out 10 simple principles. "Big Money Mistakes" is one of the best early books describing neuroeconomics for a popular audience. Way back in 1999, hidden in plain sight -- in a book intended to help America's investors understand their brains and thus make more rational investments -- was the big secret Wall Street needed to get richer.
What a lethal weapon! Belsky and Gilovich were handing Wall Street what the Pentagon calls a "psych-ops" war strategy. The authors had provided a 10-part profile of the brains of the 95 million investors playing the stock market. Now Wall Street's quants could develop esoteric algorithms to brainwash and manipulate Main Street investors.
Yes, folks, investors are still like Keech's seekers, still willingly playing Wall Street's game by Wall Street's rules, making Wall Street richer. That's Brainwashing 101, and here are 11 reasons you willingly let them take advantage of you:
1. You know you're (almost) never wrong.
"Big Mistakes" calls it "confirmation bias," another name for cognitive dissonance, the unconscious need your brain has to stick with what you already know as The Truth (even when it's been secretly planted there by Wall Street's clever ad campaigns).
