1 October 2015
When’s The Best Time to Trade?
As people find different interest in clothing, food, or music they tend to buy more of that one item. Which would shift the change in demand, since of their change in taste. This would be beneficial for many businesses, since they would have more consumers coming in and making them more profit. Making one business having an absolute advantage in more consumers, than other businesses. However, that just not be the case. Infact, when it comes to buying goods, the human brain tends to trigger, and making you want to buy everything you see. But that would just cause markets to inflate and burst, if people were to buy everything they wanted, but do not need.
Everyday, there’s always people out at grocery stores, malls, and movies spending money, which would be their opportunity cost. While they could be doing homework or be at school. But, once we’re at a place where a normal good is being provided to us, we just want to buy everything we like. As a product becomes more popular, more people tend to buy that more of that good. Which then causes the quantity demand to increase and the supply demand to decrease.
According to Los Angeles TImes, an experiment was done on 20 college students, while they each trade with one another for 50 rounds. Each player started with 100 risk free units of currency and 6 units of hypothetical risky advantages. Researchers wanted to see what exactly hyped up the players while they would trade. In order for them to figure this out, they used a MRI machine to see their flow of blood. moving to active areas. As they were trading, they saw in the MRI machine that a part of their brain called, nucleus accumbens, lighted up in most of the players. This area controls the addiction and motivation part of our brain. Researches found out as more activity came through this area in the player's brain, the price would rise higher. However, another group showed different results. There were a few people where the anterior insula would be more alert than the nucleus accumbens. The anterior insula is where people are more alert to physical discomfort. Which according to researchers made them sell their risky assets more quickly.
In conclusion, researchers found out that, in order to become a successful trader people should use their emotions a bit more rather than strategy. Since, when emotions are involved traders tend to pick the right and smart choices when it comes to trading. Which would then cause a surplus in the market, since more people will use emotions while buying and trading; buyers will pay less to save money and find better deals than just paying for something they see right away.
Rosen, Julia. "When Brain Says Buy, You May Not Know Why." Los Angeles Times. Los Angeles Times, 10 July 2014. Web. 01 Oct. 2015.