On attention, trading psychology and “open” minds

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.