Key Messages
Learn How Your Hormones Influence Everyday Life With The Hour Between Dog And Wolf
When it comes to making a fortune on Wall Street, perception is critical.
If you’re wondering just how to utilize this in the stock market, then The Hour Between Dog and Wolf is the ultimate guide.
Written by a former Wall Street trader-turned-neuroscientist, this book emphasizes how crucial our physiology and biochemical processes are in terms of managing stocks and stress.
The key lessons taught within this book can be applied everywhere – even the stock market floor.
Learn how your hormones affect decisions, what intuition has to do with bodily functions, why men and women process stress differently, and most importantly why hiring more women and older men on the trading floor can help diminish greedy bubbles from forming.
Through this book, you will learn how to think with your body on Wall Street!
Our Brain And Body Are Not Separate But Instead Strongly Interconnected
Your brain is not the only part of your body involved in thinking.
In fact, your thoughts and actions are heavily impacted by hormones that originate in different regions of the body.
An example of this is Ghrelin: a hormone which gets secreted from the lining of your stomach when it’s empty.
It then sends signals to the brain telling it to find something to eat.
However, this doesn’t mean a person cannot override these signals if they have sufficient reason to do so.
Band strong will-power can help block out ghrelin’s message – up to a certain point.
But over time, the effects of Ghrelin will become harder and harder ignore as those signals become louder and more powerful.
It gets even more interesting when considering the connection between the gut and brain when it comes to stress; they must both detect that there is an imminent threat which needs preparing for – leading the gut to save potential energy by halting digestion processes.
The reverse can be true as well; an overly sensitive gut can influence our thinking – just look at Crohn’s users who are far more emotionally reactive than general healthy individuals!
All these points show how true it really is – You think with your whole body, not just your brain!
The Winner Effect: Testosterone-Fuelled Recklessness Poses Risks To Animals And Humans Alike
Testosterone is a powerful hormone that has a major influence on our behavior.
We can easily see this play out when we face a challenge.
When facing difficult situations, the body will release testosterone so that we can compete for prolonged periods and have better chances of coming out successful.
This hormone regulates our metabolism, increases strength, lifts mood and heightens cognitive performance – all traits useful to take on any hurdle placed in front of us.
But the rush of testosterone does not only come with the positive side-effects – it also inclines us to take more risks than usual.
Studies done on traders trading in financial markets revealed that higher levels of testosterone resulted in taking more risks than their counterparts with lower levels of testosterone.
This risk-taking ‘success’ can add more fuel to the flame by further releasing more testosterone, thus creating a negative feedback loop which leads to equally reckless behavior – A phenomenon known as the winner effect, seen in animals too.
It is aptly named ‘the hour between dog and wolf’ after a French phrase which describes the twilight hours when it is unknown whether one is safe or threatened; such an eventuality where taking risks has become too much for one’s own good!
The Brain Anticipates Movements And Our Consciousness Is Just An Observer Of Decisions Already Taken
Due to our physiology being too slow, our brain has to anticipate movements rather than seeing them in real time.
This was demonstrated in an experiment in which participants were shown a circle with two color bands – blue on the outside and yellow on the inside that can flash on and off.
As the circle moves around the screen, the observer sees only a moving blue circle with a lagging yellow one behind it, because their brain anticipates the location of the blue but cannot anticipate that of the yellow dots flashing rapidly.
The same principle applies to many other psychical actions as well.
In experiments undertaken by physiologist Benjamin Libet, he found that when participants were asked to lift a finger, their brain region responsible for preparing this action became active 300 milliseconds before they had even made a conscious decision to do so.
So it appears that again, these actions are predetermined and automatic without any intervention from our consciousness acting as mere bystanders afterwards.
Intuition Is More Than A Supernatural Gift: Our Bodies Recognize Patterns To Help Us Predict The Stock Market
Traders may not realize it, but their ability to predict the stock market is rooted in their automatic physical reactions.
The key to success in the cutthroat world of the stock exchange lies in learning how to recognize and respond to patterns of incoming information.
This kind of pattern recognition helps traders make better decisions than what’s suggested by the Efficient Market Hypothesis, which states that markets cannot be predicted at all.
Contrary to this idea, researchers were able to measure that experienced traders consistently make more money than less experienced ones; they have a higher Sharpe Ratio, which is a measure for success in the stock market.
Yet even when asked why they are successful, these skillful traders are unable to explain it — thus evidencing that their intuition isn’t so much a supernatural gift as an effect of their body recognizing patterns in the environment.
These unconscious instincts are called Somatic Markers and they allow traders to learn the pattern of the markets subconsciously – when considering each option their bodies physically respond differently and this lets them “feel” which trading decision will have a positive outcome without them having any conscious knowledge on why they made it.
Therefore, traders can learn how to predict the market through their Somatic Markers and physical reactions even if they don’t consciously understand or explain why a certain trade was favorable or not.
Physical Fitness Is Crucial For Successful Stock Market Trading
The stock market isn’t your regular office job – it’s demanding, requiring traders to possess excellent cognitive capabilities and physical fitness.
For example, traders on the trading floor are often athletic young men, because they need to maintain a high level of concentration while visuo-motor scanning for price anomalies.
This kind of intense focus takes a toll on the brain, but they still have to do it for hours at a time.
Likewise, being able to respond quickly to good trading opportunities is essential in the stock market – if someone else moves faster than you in terms buying stock, you’ll miss out on profits as the stock price increases.
Given this, physical fitness can give traders an edge when making these quick decisions due to their heightened awareness of their bodies’ signals which lead to more reliable hunches.
A “heartbeat awareness” test was conducted and proved that fit and well-trained individuals were far better at identifying synchrony than their overweight peers; indicating that having such skills should be required for a trader role.
How A Bull Market Can Lead To Addiction And Risk-Taking
When stock prices are rising, traders can be lulled into a false sense of security and become addicted to taking excessive risks.
A phenomenon often referred to as the “Bull Market”, it can quickly lead to addiction driven by dopamine – the hormone associated with feelings of pleasure and desire – being released in the brains of traders.
While doing a study on rats, it was discovered that when they were given one drop of juice that caused their dopamine levels to rise, their dopamine surge started before they were even given the juice.
This would suggest that increased dopamine levels had become a longing for them; not so different from those experienced by drug addicts.
Meanwhile, when risky stocks begin to pay off for traders, the pleasant surge of dopamine released will have them longing for that rush again.
What’s more is that when testosterone comes into play during bull markets or bubbles, the risk-taking behaviour increases significantly as this hormone is known to interact with dopamine when surges occur through the brain.
With repeated wins resulting in higher testosterone levels, traders are even more likely to take greater risks; thus forming a dangerous cycle which if left unchecked by others can result in market bubbles being formed.
The Impact Of Stress On Traders During Market Crashes: From Physiological Responses To Irrational Behaviour
When faced with a market crash, traders have an overwhelming physiological reaction that worsens their chances of recovering.
Cortisol, a stress hormone, is released into the body, affecting the traders’ brain functioning.
This leads to memory impairments, making it harder for them to remember good trades and reducing their testosterone levels.
Furthermore, the frontal lobe is inhibited which makes it hard to think logically.
Then, the locus coeruleus releases more signals than normal causing traders difficulty to discern between relevant information and background noise.
All these together lead to emotions clouding judgement which stops traders from taking worthwhile risks essential for rebuilding from the crisis.
At times of market crashes, miners often can start behaving in a hostile manner toward each other as dominant figures might try to oppress weaker ones in order raise their own status; working conditions become intimidating for others as middle managers may hint at layoffs before they are officially declared.
Such an atmosphere exacerbates feelings of unease and further undermines any chance of regaining control of the stock markets following a smash.
How To Strengthen Ourselves Against Stress-Related Mistakes: Fortify Through Moderate Stress And Physical Exercise
It’s been proven time and again that stress can have a huge effect on the decisions a person makes, often leading them down the wrong path.
With that in mind, it’s important to think of ways to reduce stress so that bad decisions can be avoided.
One way to toughen up traders and reduce their chances of making bad decisions is to expose them to moderate amounts of stress in their past, as this has been found to make people more resilient.
This could come from handling young rats or through other means such as physical exercise – especially when done in cold weather – which releases growth factors and strengthens our brains against stress.
Furthermore, by giving traders freedom over which tasks they choose each day, this can help reduce the already present mental fatigue caused by their work that often leads to mistakes being made.
Allowing them control over what they are doing gives them the opportunity for rejuvenation when needed.
Enforcing Diversity On Trading Floors Helps Keep Markets Calmer And More Stable
Mixing up the staff on the stock exchange can have a profoundly positive impact on the market.
This is especially true when it comes to minimizing the effects of testosterone, which can cause volatility in trading floors populated by young men.
For starters, introducing older men into the workplace helps balance out testosterone levels and leads to less volatile markets.
Because testosterone levels are highest in young men, elders tend to be more resistant to its effects.
Despite this fact, trading floors often neglect older employees due to their slower reaction times and cautious attitude – which is often misinterpreted as fear or inexperience.
But if we consider famous investors like Warren Buffett or Benjamin Graham – both of whom achieved tremendous success well into their later years – caution and slowness don’t necessarily mean someone won’t be successful with investments.
Additionally, increasing the number of female traders has also been proven to have a calming effect on the stock exchange.
Women naturally possess only 10-20% of male’s testosterone levels, making them far less prone to hormonal-induced frenzies.
Furthermore, women have a different stress response (the “tend-and-befriend” response) than men – one that is based on being extra caring towards others – rather than fight or flight instincts.
By diversifying the staff at stock exchanges, not only will we see fewer instances of risk taking behavior that can tank markets; estrogen may even give investors an advantage over testosterone-infused male counterparts!
The Power Of Control: How Familiarity, Not Novelty, Reduces Stress In Difficult Circumstances
Our physiological stress load can increase with the addition of pleasant novelty, such as a vacation.
That was demonstrated in one study which found that all life-changing events, good or bad, resulted in an increased risk of illness or mortality.
The reason for this is that increased novelty doesn’t allow our bodies and minds to manage the stress like it would otherwise be able to.
On the other hand, having a sense of control over our situation can help mitigate stress levels and even reduce how much pain we are feeling.
It’s important to consider these factors when evaluating a stressful period in our lives — novelty will likely only add to it while feeling in control may lessen its effects.
Wrap Up
The Hour Between Dog and Wolf offers a great insight into the stock market, and the behavior of traders.
It outlines how trader’s physiology impacts their decisions and behaviors, which ultimately affects the stability of the stock market.
We find that hormones such as testosterone and dopamine have an influence on trader’s decision-making which can lead to destabilizing events in the market.
In conclusion, The Hour Between Dog and Wolf emphasizes the importance of diversifying not only gender but also ages on trading floors to make sure that rational decisions are being made by traders instead of emotionally charged ones.
