Ever wonder what drives us to take risks, or avoid them?
From fear to euphoria, a gut feeling could determine what we are going to do.
Because when it comes to taking risks that involve gaining or losing money, like trading, there is much more going on than cold logic or dry numbers. The whole body is thrown into action, according to John Coates Ph.D., a research fellow at Cambridge University in the areas of physiology and neuroscience.
Writing in The New York Times, Coates describes a scenario of what happens physically to an extreme risk-taker, in this case, a trader on a trading floor, who is at his desk, getting set to respond to news that will alter the market and create opportunities to gain, or lose, money.
Turns out, it is a gut-wrenching roller coaster ride for the body, where the heart rate, breathing and metabolism speed up, while digestion constricts.
Powerful hormones such as testosterone flow through the veins and hit the brain, boosting confidence and the willingness to take risks.
Adrenaline starts pumping, priming the body for action. Cortisol levels rise, leading to the release of the brain’s natural pleasure chemical dopamine, causing the trader to experience a rush.
Coates explains how, under the influence of all three naturally-occurring chemicals in the brain, the trader can wind up taking on more dangerous risks, or avoiding risk all together out of fear.
Read the full article in The New York Times: The Biology of Bubble and Crash