Are you Pavlov’s dog?


If you’re not aware of Ivan Pavlov, in brief, he had some dogs that, thinking they were about to be fed, would salivate whenever he came into the room. Regardless of whether he fed them or not, the dog’s pleasure sensors would leap into action. Ivan began to study this further using a bell to signal feeding time. The dogs then associated the bell with being fed which, again, got their juices flowing. Such was the influence of the bell, no matter how often Ivan rang the bell without feeding the dogs, they still got enormously excited when they heard it.
Another set of scientists, more recently, took the concept even further with rats. They set up a button that would, only 50% of the time, deliver a drop of sugar water when pressed. These rats overcame numerous obstacles to press the button, they even put themselves through physical pain to reach the button and the sugar water. So much so, the scientists laid down an electrified floor which the rats readily crossed in the hope that on this occasion the sugar water would be dispensed. (Some of the rat’s feet were burnt to nubs but they still persisted)

Now, you may be thinking what the blue blazes does this have to do with trading? Well, apply the same principle to the markets. Are you making the same mistakes over and over, blowing bank after bank, in the hope of this one delivering? When those reds keep burning your feet, it’s the intermittent greens that keep you salivating.


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