Dopamine in Trading
Dopamine and win rate in trading are interrelated things. Recently, everyone recommends using a risk-to-reward ratio (R:R) of 1:3 or more. With a high risk-to-reward ratio, your win rate decreases. But is it actually effective in terms of making your brain work?
Scientists conducted a study on the release of dopamine in monkeys. The monkeys were given a signal that they could press a lever and receive a reward. The discovery was that the release of dopamine was between the cue and the lever. That is, dopamine was released at the anticipation of the reward, and not at the reward itself! And this is important.
If you have a risk to reward ratio (R:R) of 1:3 and your win rate is 30%, then your head will not perform as well as if you had a 50% win rate, but your risk to reward ratio will be 1:1 or 1:2. The greater the expected reward (for example, a 50% win rate), the more dopamine is released.
something new about dopamine in trading
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