Monday, January 11, 2016

When’s The Best Time to Trade?

Minha Beg
Mrs. Straub
AP Econ
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.


Financial trading and the brain


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.




Works Cited

Rosen, Julia. "When Brain Says Buy, You May Not Know Why." Los Angeles Times. Los Angeles Times, 10 July 2014. Web. 01 Oct. 2015.

5 comments:

  1. Although there are a lot of people that watch what they spend, I have come in contact with multiple that tend to buy more after they've decided to only buy one item. At work, we are taught that once we sell one product to the costumer we should continue to show different products because they will be more likely to purchase them. Also, the goods that are more expensive are harder to sell unless the consumer is familiar with the brand and how popular they are. Most times, we have people come in that just want to buy the brand name, and doesn't care what the actual product is. This fact allows for companies to increase price because consumers will purchase the good no matter what.

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  2. This is an interesting topic as it seems to fit at all the different stages of life. From a young age, kids are interested in getting the best card out of a pack as they can. The sense of adrenaline begins to rush as they open up their pack. This doesn't change as people get older. I know that I get a huge sense of anticipation when I open up a pack on FIFA. Everyone wants to get something good and are often willing to pay for it. This is of course apparent in the adult level as people go to casinos for the chance to win big. I think you did a good job of connecting people's addictions to the effects in the economic world.

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  3. While intuition can be helpful in making big decisions, it would be disadvantageous to just ignore factual data. After all, the basis of economics the calculating of marginal costs and benefits: if the benefit of doing something is greater than the cost, then it would be logical to do that something, and if the cost is higher than the benefit, then it would be smart to avoid doing it. However, there are some costs and benefits that cannot be easily quantified, such as emotions, so I think that would be a situation where emotions are involved in decision-making, only after all factual information is considered.

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  4. In the world today that is full of numerous amounts of items and products that people can purchase it can be difficult to make decisions on what to buy and what not too. I agree that one's emotions plays a huge role in their buying process. Overall, the buyer wants to have a larger benefit from the product than the cost of it. With that being said there are some points where emotions take control and that influences your decision to get that particular product. That can be good though, just making sure you consider what the products benefits to you are and if it out weighs the costs that are associated with it.

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  5. eToro is the ultimate forex broker for newbie and advanced traders.

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