Our Universal Emotions and its Cycle

Are these emotions familiar to you – Happy, Shock, Afraid, Angry, Sad or Disdain?  Have you felt any of these 6 today? How many times have you felt at least one of the 6 today?

If you do, then you are officially HUMAN!

Scientists tell us that if we breathe, live and hence have feelings, then they could break all of our emotions down to just 6 that are universal. One that are felt by all; no matter, color, culture, education, country, race, language, wealth etc. felt at any one time or another.

Can you picture these 6 emotions that you can’t run away from?

The 6 faces below can help. It gives you a picture of these 6 emotions that are universally felt. One that you have seen in those close to you, those you don’t know and that of your own in the mirror or photos.

universal emotions

(the last face you see on the left bottom corner is that of Paul Ekman, the psychologist behind the study of these faces)

Do you think these emotions are confined to daily living and relationships?

There is more.

Beyond feeling them, there are cycle of emotions we go through.

Below is one where an event shocks us so much that we go into a cycle of denial and then despair. Perhaps anger, disdain, afraid all thrown in the ring. We bargain with the situation and perhaps even with a higher power, “Why me?” “Why am I in this situation?” We sink into depression. Below is a model by Kubler-Ross. A cycle of denial, before recovery arrives.

cycle of emotions

There are two issues here:

1. Do we think this Cycle of Emotions is confined to love and life? Or does it happen to us as well when we trade or think we are investing (for the long term) or are taking risks with our money?

2. Are we able to get out of this cycle of denial and depression?

Firstly, the answer to Q1.

See diagram below.

cycle of emotions price chart 2

Doesn’t the blue price chart above look just like the chart of the Cycle of Emotions diagram (on the top right) depicted by psychologists?

It belonged to a currency pair during the second week of July, when the Greek Drama was slowly unfolding and as it took different turns and twists. However, it could have easily been that of any other underlying investments.

Money, trading and even if you think you are investing for the long term and are not greedy and are merely looking for some reasonable returns from your money; the reality is, you are swept into the cycle; whether you like it or not, want to or not. You are in; just because you are human, with emotions and money (to be made and spent).

So, the answer to Q2 then becomes so important to us all, doesn’t it? Not just as traders, but as humans who can’t escape from feeling emotions and the circle of money.

What do we do?

What we will do during the period in the green circle in the diagram above is the key. We know we can’t remain there, yet not know how to get out of it…

I very much want to get you out of the depth of this cycle of emotions and move with you up the curve to acceptance and recovery, right here, right now. But I would like you to think about your own cycle of emotions for a couple of days and I shall see you on Monday night Sydney time (9pm)  to explain to you at a webinar what we shall do.

20th July Monday 9pm Sydney. Register below. See you there.




Are creatures better than us in computation?

A number of recent news stories have had a similar kind of message: animals viscerally understand certain mathematical operations better than humans do. Such stories are always interesting in a Sunday-newspaper sort of way, but do the abilities of animals to calculate really exceed those of humans? It may help to examine some of these claims.

Lessons for us:
– Creatures learn and apply.The don’t agonise and get confused.
– Creatures don’t use algorithms or keep spreadsheets. They come up with the best estimates.

Takeaway: the innate instinct that we share with creatures can help us make better snap judgements!




Fear memories – do you have it?

What if losses are real and the magnitude of it is also real? ( In contrast to what was discussed in previous post, where memories or magnitude of the event was imagined or implanted)

Why do financial losses (regardless of magnitude) leave a greater impact on some while others are able to move on easier?

Based on this research, if the event of loss created a shock in us, then it releases a neurochemical (noradrenaline) that causes the fear event to be saved/encoded as Fear Memory. ( versus an ordinary memory)

Once this Fear Memory is encoded, multiplied by them being recalled (beep) each time electric shocks like: unrealised losses or the risk of losing rear their heads, it makes decision making on a neutral state a big challenge. Fear dominates and overwrites rational. Fear Memories, if not made aware and if allowed to lurk in the back ground, subconsciously, causes fear induced or biased investment decisions.

Had this happened to you?



People can be convinced they committed a crime … or incurred losses

Did you know that people are able to internalise stories told to them, even though they never did happen? These are called “implanted memories”. Did you know that implanted memories can vary from childhood “memories” to even investment losses? When it comes to money, it’s normally not the absence of the event, rather, it’s the magnitude of the loss. Larger in memory than the actual.

Some catalysts for these can be the constant pounding of bear market stories or stories of losses suffered by other investors in the media. These create the impression that a similar situation had happened to the person. Often in reality, losses are smaller than “thought”, but are magnified in their mind due to the repeatedly told stories of losses. Be careful what you hear. http://www.psychologicalscience.org/index.php/news/releases/people-can-be-convinced-they-committed-a-crime-they-dont-remember.html


Investors’ Brain

I was forwarded this article from Bloomberg recently.
It’s most relevant in the volatile market environment we are now in.
Be vigilant of your own emotions when making that buy, sell or do nothing investment decision. All the best, Wai-Yee

Brain Scans Light the Way to Do-It-Yourself Investing
By Ben Steverman Oct 8, 2014 5:10 AM ET

September was “hell on earth” for Walter Ribeiro. A 29-year-old resident of Dublin with Portuguese and Brazilian roots, Ribeiro is heavily invested in Brazilian stocks that were slammed last month. A 21-percent gain for his portfolio year-to-date turned into a 10 percent loss.

“You can find yourself thinking about stocks all day,” Ribeiro, a full-time project manager and part-time college student, says of his mood then. “I really started to doubt myself: Why did I do that? Am I really doing the right thing?” On weeks his stocks did really badly, he would cancel weekend plans.

This is why people hire financial advisers — they help shoulder the stress. At the same time, they can be expensive, they can have conflicts of interest and it’s hard to know which ones to trust. Fortunately, the services and tools available for do-it-yourself investors are better and more useful than they’ve ever been.

Just as important: New research is helping investors understand what drives their financial decisions, so they can prevent emotions from costing them money.

The new field of neuroeconomics is giving investors insight into the brain chemistry behind their market moves. When volunteers for a lab experiment contemplate risky investments, brain scans show it lights up their anterior insula, the deep part of the brain that processes fear and anxiety. Other studies show the more anxious a subject becomes in a lab — anxiety can be induced more conveniently with rotten food or scary images than with junk bonds — the less confident they are in identifying investment opportunities.

So even contemplating investments can make people basket cases — and then their moods undermine their decisions.

“It’s a double whammy,” says University of North Carolina finance professor Camelia Kuhnen. A stressful day at the office, or a fight with a spouse, can make an investor overly cautious. And research on the brain chemical dopamine and the so-called “reward center” of the brain shows that the opposite is also true: A great meal or successful date can push investors to pile on the risk. Genes may even play a role, says Kuhnen. Some people have a gene that predisposes them to be more anxious investors, while others have a gene associated with risk-taking.

More on Do-It-Yourself Investing:

Three Ways to Get a Steady Paycheck Long After You’ve Retired
Slay the Little Beasties of ETF Investing
You’re Not a Piñata. Find a Financial Adviser Who Knows It
An Investor’s Guide to Fees and Expenses 2014
Without some radical and very stupid surgery, there’s no way to turn off the anterior insula or the dopamine. But if investors don’t trust themselves to stay cool, they have more online tools today to help them keep emotions in check.

These tools prevent do-it-yourselfers from screwing up by limiting how many decisions they have to make. Target-date funds, for example, automatically buy fewer stocks and more bonds as retirement approaches. Online brokers can take clients through a questionnaire, suggest an appropriate portfolio of cheap index funds or exchange-traded funds and then re-balance those funds regularly – all without more than a few clicks of the mouse — for little more than you’d pay if you bought the funds on your own.

Those who want more active control of their money need to accept that they’re not as rational as they think, and work harder to master their emotions. A small but growing group of mental health professionals, financial planners and academics is trying to help through a field they call “financial therapy.”

Therapists can teach calming techniques, like breathing exercises or muscle relaxation. They can also plumb a patient’s past to help him understand why he behaves irrationally about money. A parent’s credit card problems may leave an adult child petrified of debt, for example. People find it easier to change their behavior when they understand what’s really motivating it, says Kristy Archuleta, a Kansas State University professor and editor-in-chief of the four-year-old Journal of Financial Therapy.

Ribeiro doesn’t have a therapist. But he does occasionally email about investing with a former teacher. Those conversations helped him hold on to his stocks rather than panic and sell at what might be a bottom. “I’m trying to stay calm,” he says. He reminds himself he’s saving for retirement, not trying to make a quick profit.

That’s smart. It’s also a difficult attitude to maintain when markets are crashing and savings are evaporating. The upside is that, as with anything, it gets easier the more you do it. And mental stamina — the discipline to stick with well-laid investing plans — is a big part of being a successful investor.