A single-speaker YouTube monologue arguing that the fatal flaw in traders' risk management is treating risk/reward as a purely cognitive calculation while ignoring the emotional ("caveman") brain that frames outcomes as threat or opportunity. The speaker explains how evolutionary threat/opportunity responses (fight/flight/freeze/attack, urgency to seize rewards) hijack reason during real-money trades, producing revenge trading, overtrading, failure to take small losses, and impulsive opportunity-seizing. The practical implication: traders must recognise and calm the emotional response so thinking-brain risk rules can be followed.
Chapters
The way we think about risk and reward, really, unfortunately, it's more cognitive. We think, oh, well, we have this amount of risk, we have this amount of reward, and this is worth taking the risk for. And we think of it like as a cognitive function. Then what happens is we get in the trade and real money's there and life and death seems right there with us. Suddenly, the risk management, all that fancy stuff that the thinking brain did, is done.
Why.
The deal is this is that your brain, your emotional brain, that which I often call the caveman brain, doesn't think in terms of risk and reward. Instead, it thinks in terms of threat, opportunity. Now, I want you to listen to those words. Risk management.
Risk reward. Yeah, it's something that's far off. They're not emotionally charged words. They're cerebral, they're thinking. They're exactly what you would want if you were an actuary. Now, but then let's take a look at this. Listen to the word threat.
Completely different connotation. Doesn't all sudden threat goes to the core of the matter. That's because your caveman ancestors were built to deal with threat, and it had. You couldn't think. What you had to do when a threat arose in the environment, like a saber tooth tiger coming right at you is you didn't have time to think and be cerebral. You had to interact with that threat. You either had to run, hide, freeze, submit, or attack. Those are the only options to threaten. Now, our caveman ancestors made that a trait response to threat, the fear of loss, because it was successful for us to become.
A species that could dominate all others. Now, the thing, though, is this is it locks in when you see threat. Suddenly you're no longer using your thinking brain. You're using your emotional brain, and it's about action. It's about reactive response to perceived threat. Now, if you've ever taken your really nice and fancy risk management tools into trading and found out that you revenge trade, you didn't want to take that loss. Well, no kidding. Understand, to your caveman ancestors, taking a loss meant forfeiting your life as a meal to somebody else. No, you're going to fight to the finish. You're going to fight till there was nothing else left. Yeah, that's survival. That's survival strategy versus probability strategy. That's in risk management. So we come back to this, okay, I can talk all I want about risk management, but what my brain, my emotional brain in particular is doing is it's. It's looking at threat in the environment. That's in the markets. And if it's. If it's something viable, if it's something that could, like, be potentially dangerous to your life, it's going to react and fight flight.
Now, this is the other incredibly important thing to get. Caveman brain does not know about risk management. He doesn't know about taking small losses in order to be able to keep conserve your capital. If you gave a ton of money to a caveman, he wouldn't know what to do with it. He may burn it, but it doesn't mean anything. What means something to caveman brain is the power to survive, the power to control the environment, the power to control outcome, winning, the power to not lose. Do everything under your power not to lose, because at that particular time, you lose, you're dead. Now that's the threat end of this. And to caveman brain, there was also something called opportunity. Now, you think about it. A woolly mammoth is a big creature, yet our caveman ancestors would get all cracked up, urgency to act, to attack one of those guys and take him down, kill them. It fed the entire clan for months. Got all sorts of stuff, Clothing, you got needles, you got everything.
Now, the problem was there was also a lot of danger involved. Opportunity danger, okay? Now, to do that, they had to be able to seize that opportunity, and they had to be able to get cranked up. They had to have urgency. They had to be willing to act right then. Yeah, that's exactly what we're talking about. And all of a sudden you start going, oh, my gosh. What you're saying is when we're in thinking brain, risk management makes a lot of sense, and we need to learn to do that. The problem is we are ignoring our caveman emotional brain who does not perceive, and risk management, it is threat that I have to avoid or attack or opportunity that I need to seize the moment right then before it gets away. Yeah, that's the deal. Underneath that high cranking cerebral cortex years is that emotional brain perceiving reality that way. And unless you're able to calm it down, okay. So that it doesn't reactively just hijack thinking brain every time you come to that moment of taking a loss or jumping on opportunity, you're back with cavemen and you're no longer thinking in terms of the loss being a capital loss, you're looking at that cost as being a threat to your biological existence. Yeah. This is why people have so much problems with trading the opportunity. Like an alpha, they see, they seize an opportunity and they want to seize it. They want to take action right now. Okay. Because it feels good. It feels like, wow. I feel the testosterone. I feel the rush. Yeah. Exhilaration. The problem is in trading. That's going to get you in a world of hurt. Caveman required that to be able to crank himself up to attack huge creatures for dinner and to fend off huge creatures who wanted to take your life. That caveman brain is quite active.
Okay. In response to stress, in response to challenges. Okay. Now you're okay until you meet that challenge. And suddenly that caveman wakes up. Oh, my God. There's a threat. It's not a capital threat, though, to caveman. It's a biological threat to its existence. Then you wonder why you revenge trade. You wonder why you over trade, and then you get burned really bad. Then you wonder why you have a hard time getting into trades. Yeah. This is happening at the emotional brain. How do you work with this? This is really powerful knowledge. If you're listening to it, go, oh, I've been thinking risk management, when I really needed to be thinking about threat opportunity and caveman's emotional response to those two. Yeah.
What you're going to need to learn to do is not just regulate the body so that it doesn't get cranked up and go to fight flight. We teach that too. But you're also going to have to control the mind that shows up to manage that challenge. Because left by itself, meeting that challenge of risking capital is going to trigger. Is going to trigger caveman to thinking he's being attacked and it's a threat to his life, and he has to act from that position. So you're going to have to train a mind, Train the brain to do something alien to what it was built to do. And we can help you with that. I would love for you to go to our website, go to YouTube, probably where you're watching this, and start really studying what I'm talking about. Then start taking links. Hey, let me get the free book now. Maybe let me get some guided meditations, maybe get his book. But really, when it comes down to it, once you realize that mind and biology cannot be separated, you're going to have to learn to work with that. Look at our courses, okay? We've got group courses. We have individual courses. They're powerful, and they are built to teach you how to rebuild the mind. So get out there, take a look at risk management, risk reward, and then compare that to threat, opportunity. Think from the emotional brain, caveman brain, because when you're under stress, that's what's there. And we'd love to help you study more. Okay? Come to the website. Check it out. Really study. There's a lot of content there. A lot of free content. Study, friends, learn. Come and learn.
