Intermittent Reinforcement: The reason losers keep trading.

Discussion in 'Psychology' started by ChkitOut, Apr 3, 2013.

  1. Intermittent Reinforcement


    Intermittent Reinforcement - Intermittent Reinforcement is when rules, rewards or personal boundaries are handed out or enforced inconsistently and occasionally. This usually encourages another person to keep pushing until they get what they want from you without changing their own behavior.


    Intermittent reinforcement affects the way we think about rewards. Think about slot machines. Slot machines are programmed to keep a small percentage (usually 5-25%) of the money and pay out the rest in "random" winnings and jackpots. If the payout was predictable, for example, if on every play the gambler entered one dollar and got back exactly 90 cents, the odds would be the same but the gambler would quickly get bored and annoyed. What keeps them feeding the machine is the frequent small payouts (2-10 times the bet), the occasional medium sized payouts (50-100 times the bet) and the dream of the rare payout (over 1000 times the bet). Most people will feed small and medium-sized winnings straight back into the machine and keep playing until they get bored or go broke. That's how intermittent reinforcement works. Slot machines account for approximately 70% of casino earnings.

    Intermittent reinforcement also influences how most people think about risks. For example, consider people who build houses on beachfront properties, which lie in the strike zone of hurricanes. If a hurricane hit every year, nobody would live there. But hurricanes tend to be rare and unpredictable. The more time that passes between disasters, the more properties get built in the strike zone. People are attracted by the appealing locations and the low property prices and are willing to rationalize away their concerns. They may see others living happily on a beach paradise and fear missing out on a great opportunity. They may tell themselves: "It's been decades since anything ever happened here." That's how intermittent reinforcement works.

    The purpose of this paper is to draw attention to a possible behavioral explanation
    for why economic actors persist in activities that continue to lead to no gains or even losses.
    In addition to stock trading, these can include, for example, persisting in unprofitable
    investments in R & D or marketing efforts, banks extending additional credit to customers
    with financial difficulties, or even some forms of gambling behavior.

    ps: also why internet message board posters will have visceral reactions to trading dissenters even when they themselves are losing. :p
  2. southall


    More recent research suggest 'near misses' are a big reason why gamblers love to gamble.
  3. fascinating. and i can certainly relate from a trading perspective on the near miss phenomena.

    the main point id like to drive home is that there is psychological defects happening with a lot of "learning" traders that they are not aware of.
  4. The absolute 100% reality is....I don't care why you trade, or why you fail or why you win.....has nothing to do with my life. and I won't explain my life to anyone (save family and wife, etc..) because that is a waste of time and energy on why I do what I do...

    but it's fun to ramble on the internet.

    1. I think losers keep trading because they don't want to work for the matter what. even welfare, food stamps before working at McD's. Pride on the OTHER jobs....and to tell people 'I'm a trader'. trust me, nobody cares. money is money.

    2. they know in trading they can create something that is a new trade that they think will add value and this is something much harder to do in reality. most of the time, you are a monkey working for.....yes...the man.

    3. they like to be the man

    4. they have a chance to make thousands a day.....something they can't do working guessed it.

    5. I've been in this funny situation for months.....years ago. and the novelty wears off very fast. bottom line: making money? oh , ok....well, how much? oh....not that much. need money more than respect or anything forget reasons....just look at the P/L AFTER you pay all your other monthly expenses.

    I now own a house mortgage. so I have money to daytrade....but still would rather just do some stocks and funds. daytrading with your own money is like at first....then a grind....and the grind is OK if you are making at least 6k a month. if not.....forget all the's just not worth it.

    if you must gamble.....sure, waste 1-2k in the ES while you spend 100's of hours staring at charts......that is fine if you must. but try not to do it too many times.
  5. ammo


    you start with those,in most professions you and your colleagues all have the same defects and except them, most folks think it's too hard,i will do it tomorrow,it's close enough,big deal ,everyone else is doing it,this will be our secret..etc....all common in most trading all those weaknesses have to go away..or your acct's live has to be accurate..your entries/exits have to be at the optimal moment. thats nearly impossible ,throw in any of those reasons mentioned in your decision process,it is is made on those human weaknesses