Bobby said:
Hello Magdoran,
Nice to have a comment from you, but need your help with what is the most powerful emotion of the two regarding trading.
Greed being excessive desire etc etc.....
Fear being anxiety etc etc.....
Regards Bob.
Bob.
Geez Bob,
I thought my point was pretty clear, I was using an analogy… I’m suggesting that generally fear is more powerful than greed.
There are exceptions such as someone with strong discipline or commitment (say a committed combatant in a war who fights for a cause they believe in and are prepared to die for – as opposed to a soldier who fights because of the fear of authority and being shot for desertion – two different mental states). I still think part of this is drawn from the fight or flight impulse. In trading then discipline can overcome fear (or for that matter greed – keep your head when everyone else is losing theirs).
Think about a group of Cromagnons and the social structure that allowed them to surpass the Neanderthals. They co-operated in large groups and had social cohesion. But there seems to be evidence that there may have been a hierarchy of who got the prime meat (just look at nature programs on monkeys).
While there are (perhaps) emotions of affection (love – I think juddy raised an interesting perspective here, but suspect that the nature of our emotions is more complex than a simple thesis/antithesis model – I suspect that millions of years of evolution yielded a considerably more complex and multifaceted set of hard wired emotions with inbuilt areas of flexibility, and that these vary considerably – ala nature vs nurture polemics) in such groups which have an important place in the social behaviour, but that the emotions of fear are possibly the core influence on behaviour.
Examples are: fear of separation, fear of physical harm from a stronger member of the group or fear of the dominant faction in the group, fear of not getting their fair share of the food or wealth, fear of other predators or hostile rival groups, fear of the unknown (e.g. lightning), jealousy etc. I don’t accept that fear is the opposite of love. They are different complex emotions. Some people hold that hate is the opposite of love, but I suspect that these terms have limited application because we view these emotions subjectively, and that they are far more complex than most believe.
Also, Ducti raises some interesting ideas in this area to – that of mass psychology – aggregated emotions. This is the other dimension to think about. Not just what you’re feeling, but how you react to the market, and how massed participants react. This context adds a whole layer of complexity on simple individual psychology, and is the key to understanding markets. If fear of losing overrides the pleasure of winning on a mass scale, perhaps this tells us something about how markets trade as ventured by Ducati.
So, when it comes to the market, happytrader made an excellent point about just looking at how markets trade – just look at most charts and what do you see? – in stocks you see fast moves down. Why is this arguably consistently so? Look at commodities when there is a fear of a shortage. See how they skyrocket in a blow off move. Go back and look at sugar futures in the late 1960s and early 1970s (ala Jim Rodgers book “Hot Commodities” pp.182-183) where sugar peaked at 47 times the price from 1.4 cents to 66.5 cents.
Look at those who benefit from these strong moves. Look at George Soros and his understanding of the financial banking institutions in Europe. By shorting the UK pound he made millions, and set aside fear and made decisive business decisions. This is the mind set required to succeed, but the gaining of this mindset is elusive. This is why books by Mark Douglas for instance are sought after since they elegantly assist the individual to recognise their own psychological makeup.
So there is a distinction here: Individual psychology and mass market psychology. One looks at the inner workings of a trader/investor, and the other looks at the aggregated way markets trade.
At the core, it would seem plausible to argue that fear is more powerful than greed, but it depends on the context. Greed in the long run has driven humanity to significant levels of prosperity historically. The sheer material wealth in this age dwarfs any previous age if you compare living standards in the past centuries (in the developed world – if you look at all people though, there is mass poverty in developing nations – perhaps this should also be considered in a broader context, but the focus here is on markets in developed nations and world markets).
On an individual trading level though, Ducati’s and happytrader’s points clearly argue that greed is the primary emotion, and at this level I agree with that hypothesis.
Regards,
Magdoran