The Psychology of Trading, page-14

This might be a good opportunity to understand our emotions a bit better and how they impact our trading decisions. I personally think, that understanding our emotions are as valuable as understanding the charts, the fundamentals, the micro and macro environments etc. As a matter of fact, it is the state of your emotions which will allow you to read the technical and financial aspects of any company correctly.
We all have five primary emotions. They are anger, fear, disgust, sadness and happiness. The many other emotions are called secondary emotions and have the roots in the primary emotions. Secondary emotions are much more complex. However, I believe that what was expressed on HC after the FDA decision were mainly the whole spectrum of primary emotions. Yes, even happiness in some post (see everybody, I knew it wasn’t going to work out).
From an evolutionary aspect emotions are very important. They communicate to ourselves and the outside world. Fear warns of potential threats, disgust warns us of danger foods, behaviours and ideas, happiness indicates that we are safe and in homeostasis, anger warns us of impending threats and signals dominance and sadness to gain sympathy.
The three dominate emotions expressed on HC were anger, fear and disgust. Whilst it is absolutely normal to experience these emotions it often is not useful to act on them immediately. You may remember that anger and fear are the main drivers in our fight and flight response in our amygdala. The job of the amygdala is not to think but to react. The job of thinking belongs to the prefrontal Cortex.
The way to the prefrontal Cortex leads through careful questioning. Is the fear that the share price goes back to $ 1 rational? Is the fear that I lose all my money rational? Is my anger at the FDA justified (especially since I don’t know what exactly was discussed?). Is my anger at the gloating posters (I told you so) justified? Once you start questioning with as little emotion as possible the prefrontal Cortex will kick in and give you rational answers. Whatever the answers will be, I suggest you act on them.
It was very enjoyable to see how quickly HC posters found their way to the prefrontal cortex after the initial rage and frustration. I truly enjoy reading some of the well-argued comments which evaluate the possibilities of Mesoblast and the difficulties in reaching them.
Mesoblast is occasionally compared and touted as the next CSL. I certainly believe that it is a possibility. One of many possibilities. I believe that Mesoblast is in a transitionary phase and transitions and change are always difficult – ask your mother! If you believe that Mesoblast has the same potential as CSL it might be worthwhile to look at the chart of CSL and see what happened in their transitionary phase.
All the best for the coming week and remember to stay away from your Amygdala!