Ep36 - Crossing the Red Dragon

In this episode, Dan Passarelli explores how biology and psychology quietly influence every trading decision—often more than logic or data. Through a story that begins in the Chicago trading pits and leads all the way to a conference in Hong Kong, Dan recounts his unexpected encounter with John Coates, a former Goldman Sachs trader turned neuroscientist and author of The Hour Between Dog and Wolf.

That meeting opened Dan’s eyes to how our hormones, brain structure, and subconscious impulses affect trading outcomes—especially in long-term strategies like the Cycle Recycle Trade, where patience and discipline are tested by human nature itself.

The title, “Crossing the Red Dragon,” refers both to Dan’s physical journey across China and the metaphorical journey traders face when crossing from logic to emotion—from the rational prefrontal cortex to the ancient instincts that drive risk-taking.

Inside the Episode

• Why trading decisions are influenced as much by biology as by strategy

• How hidden biases—like availability and recency—cause traders to misread success or failure

• Why statistically sound systems still “feel wrong” when results come unevenly

• The psychological tug-of-war between small, immediate rewards and larger, delayed ones

• How understanding the science of compounding helps traders stay disciplined through losing streaks

Key Insight

“Trading isn’t just logical—it’s biological. The greatest edge a trader can develop is self-awareness.”

Recommended Reading

Book: The Hour Between Dog and Wolf by John Coates — a fascinating look at how the body’s chemistry and brain structure affect financial decision-making. Available on Amazon. John Coates is a former Goldman Sachs and Deutsche Bank trader who earned his PhD at Cambridge and became a neuroscientist studying the biology of financial risk taking.

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Disclosure:

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document

Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.

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