The Hour Between Dog and Wolf | John Coates

Summary of: The Hour Between Dog and Wolf: How Risk Taking Transforms Us, Body and Mind
By: John Coates


Embark on a fascinating journey with ‘The Hour Between Dog and Wolf: How Risk Taking Transforms Us, Body and Mind’ by John Coates. This eye-opening book reveals the intricate connections between our brains and our bodies, with a focus on the influence hormones have on our thoughts and actions. Gain insights into how powerful hormones like testosterone affect behavior and risk-taking, and how our brain anticipates movements due to the limitations of our physiology. You’ll also explore the role of intuition in decision-making, the importance of physical fitness for stock traders, and the impact of stress on market crashes and recovery. The book urges the reader to reconsider the conventional wisdom about the brain and the body’s interconnectedness, giving them a whole new perspective on risk-taking and decision-making.

The Whole-Body Thinking

Our thoughts and actions are not just influenced by the brain, but also by different regions of the body. The hormones released by the gut affect hunger, stress affects digestion, and even gut sensitivity can influence emotional arousal. It’s time to think of the brain and the body as one connected system.

Testosterone and Risk-Taking

Testosterone, often considered one of the most potent hormones, profoundly influences our behavior. It accelerates metabolism, cell growth, and strength, among other things. However, high testosterone levels can also increase risk-taking tendencies, especially in competitive scenarios. In a study discussing traders’ testosterone levels, researchers found that higher testosterone levels didn’t improve skill levels but increased the risks they took compared to individuals with lower levels. This behavior, often successful, triggers the Winner Effect, causing more testosterone to be released. This feedback loop can lead to harmful and reckless behavior, known as ‘the hour between dog and wolf’ transformation. Similarly, animals’ high testosterone levels can make them victorious in battles but prone to severe risks resulting in premature death.

The Anticipatory Nature of the Human Brain

From catching a ball to making decisions, the human brain is wired to anticipate events. Due to the delay in how we perceive the external world, our brains are forced to anticipate the position of moving objects. This was shown in an experiment where participants saw a blue and yellow circle move around a screen. They saw a blue circle with a yellow one lagging behind because the brain anticipated the location of the blue circle. Furthermore, the brain prepares for an action before consciousness makes a decision. As a result, consciousness seems to be a mere by-product of our actions.

The Science Behind Trading Intuition

Have you ever wondered why some traders seem to have a natural instinct for predicting the fluctuations of the stock market? It turns out that what we call intuition is actually pattern recognition, a skill that can be learned. Although the Efficient Market Hypothesis argues that markets are unpredictable, experienced traders consistently outperform the market. This is because they subconsciously pick up on cues from the environment, which trigger physical responses that influence their intuition. Research shows that the most successful traders are those who have steadily increased their Sharpe Ratio over time. So, if you’re interested in becoming a successful trader, don’t discount the importance of developing your pattern recognition skills.

The Fitness Advantage in the Trading Floor

The trading floor is not just for the brainy, but also for the physically fit. Trading demands great concentration, stamina, and quickness in making trades; qualities that former athletes possess. Traders engage in visuo-motor scanning, scanning screens for tiny price differences for hours, which requires great focus. Physical fitness is vital as it enables traders to correctly interpret their bodies’ signals, leading to more reliable hunches. Traders must be fast because if they hesitate, another trader can get in before them and affect the stock prices. Researchers discovered that fit and well-trained people identify heartbeats adeptly and accurately than overweight individuals, indicating that the ability should be a requirement for trader recruitment. In conclusion, traders are not just mentally sharp individuals but also physically fit individuals taking advantage of the fitness edge to make a successful living.

The Addictive Power of Trading

Trading in a bull market can be addictive, much like gambling, due to the potential rise in dopamine levels. Studies show that risky trades can lead to addiction and greater risk-taking. The combination of dopamine and testosterone during bull markets increases the chances of greater risks being taken by traders. This Winner effect can lead to a vicious cycle in a market bubble formation.

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