By Andrew Menaker, PhD
Have you noticed how often the word uncertainty is used in the financial media? I think it may be one of the most commonly used words by market experts.
Although I tend to chuckle when I hear yet another expert use this word, I know it’s probably the most accurate description of market conditions at pretty much any time.
And uncertainty’s close cousin, ambiguity, is also always present. There are always mixed signals, some things say up, others point to down. Even with a good edge, this is what we face on a regular basis; uncertainty and ambiguity.
I’m doing a webinar for YellowTunnel on this important topic; I’ll be doing a deeper dive into uncertainty, including emotional dynamics and some of the neurobiology of uncertainty.
Here’s a sneak peak at just a few of the things I’ll cover in the webinar.
One of the differences between professional and non-professional traders is that professionals understand that uncertainty is always present; and they respond to uncertainty differently.
One of the primary dynamics that you should be aware of is that the greater the uncertainty, the stronger the need for immediate gratification. If you think about it, this makes a lot of sense. The reason is that uncertainty brings anxiety, and the more anxiety the more a person will desire immediate gratification to end the anxiety.
Another dynamic to be aware of is that uncertainty makes us more susceptible to cognitive biases such as confirmation bias, regency bias and other biases that draw upon past experiences and beliefs.
For a deeper dive into this topic, watch the webinar, “Your Brain on Uncertainty”
Andrew Menaker PhD is a trading psychologist; you can read more about him at http://www.andrewmenaker.com