Posted by Tim Stobbs on November 23, 2009
Have you ever had those moments when you are trying to decide something and your brain doesn’t seem to be working? You are trying to think straight, but it really isn’t happening. So perhaps you sleep on it and try again in the morning. Suddenly everything is so much clearer in your head and the answer becomes obvious. So ‘sleeping on something’ does work to help you think straight, but why? Well that’s an interesting answer. I was reading a book that referenced some neuropsychology about this very issue.
It turns out our grey matter is a hell of a lot more complex than we give it credit for. For example, when facing a decision where you are stressed, fatigued or highly emotional you will literally stop using the logical parts of your brain. Instead you will almost purely be using your emotional and instinct parts of your brain, so this is why you should always sleep on big decisions. Your ability to decide with any kind of logic is usually shot to hell late at night or when you are highly emotional.
This little fact brings forth some interesting implications about online trading. Basically you should avoid doing anything when you are highly emotional and stressed. If, for example, the market drops by 10% in a day, the last thing you should do is log into your trading account because you are likely going to do something stupid. You literally won’t be thinking straight, instead you will have a chemical soup in your brain driving you to stop the pain. Which will usually mean selling something and completely forgetting your long term buy and hold plan. Not a great idea.
The same idea applies when you are tired, so hence why after being up for an hour straight last night with my youngest I was really not any good at doing any mathematical modeling at work this morning. I was fatigued and so my logical parts of my brain were not fully in gear. This is why what took me two hours to do something that would normally take about half an hour. (It is also why I published this post at night since I was not in any condition to write a post this morning).
Now the sleeping on it idea seems to work well for this issue, but what else works? Well in my case I’m a big fan of stop thinking about the problem for a while and come back to it. By that point I’ve calmed down and can think logical again. How about you? What do you do when you are not thinking straight?