Sep 10, 2006
By: Alvaro Fernandez
Dr. Brett N. Steenbarger, author of The Psychology of Trading and numerous articles on trading psychology , has posted a fascinating article titled Approaching Trading With an Empty Mind, where he describes the risks of becoming “prisoners of the mental maps we create”, and missing new patterns and realities, thereby preventing us from adapting, and succeeding, to new circumstances.
He quotes a book by Deep Survival: Who Lives, Who Dies, and Why, in which Gonzalez “has provided a concise formula for trading success: boldness and humility. The exemplary trader has the boldness to act with conviction, and the humility to realize that what is apparent may not be all that is there.”
Does this sound very abstract? Well, why don’t you try this little experiment, conceived by Simons and Chabris for their classic study on sustained inattentional blindness (1999).
You will watch a brief video clip, and your challenge is to count the total number of times that the basketballs change hands.
Click here to view the Basketball Experiment clip (To view it, you will need to have Java active in your browser. The video is fairly large, 7.5MB, and it might take a while to finish loading.)
You can read about the fascinating results here.
Why this is important for traders
Dr. Steenbarger warns traders “not to miss the gorillas in the market”, by keeping a humble and open mind, ready to pay attention to new and to learn.
In his book, Laurence Gonzalez suggests that the practice of Zen meditation may help train this mental attitude. Articles like this are examples of the growing importance of the field of behavioral finance and neurofinance, which are becoming fertile ground for training ideas that improve trading performance.
Why this is important for everyone
I have been giving a number of lectures on “New Brain Research and its Implications for Our Lives”, combining research findings with fun activities and experiments-such as the “Did you miss the Gorilla” above. Participants are usually shocked first by the proof that our brains are far from being as perfect as we usually believe they are…and then a tremendous collective laughter follows.
The point is: some times we need to narrow our focus in order to complete very demanding tasks, some times we need to keep an open mind, empty of constant mental chatter, in order not to miss the big picture. Practices like Zen, yoga, meditation in general, or, for the visual-and-technology oriented among us, biofeedback devices, may help to train this “keeping an open mind” muscle part of Brain Fitness.