Information Processing and Trading

Information Processing and Trading - Information Processing...

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Information Processing and Trading Brett N. Steenbarger, Ph.D. www.brettsteenbarger.com Here is an interesting observation drawn from the past six months of working with a large group of full-time traders: The most successful of the group never change the displays on their screens. Each morning the same information appears in the same place. The less successful traders, on the other hand, tend to experiment. They will look at different indicators each week, different ways of displaying the data, etc. Now it may just be that successful traders are sticking to what has been working and less successful ones are casting about for solutions. I think, however, that it goes beyond that. New traders who become successful start out more consistent with their screen displays than struggling new traders. From an information processing and learning vantage point, this makes sense. How do traders develop a feel for the market? During the research for my book, I came across a large—and underappreciated—body of research documenting the phenomenon of “implicit learning”. Subjects in studies, exposed to complex patterns in number sequences, eventually learn to predict the next number in the sequences at levels far greater than chance. This typically occurs only after thousands of trials and immediate feedback regarding success/failure. Interestingly, even after they have developed this predictive ability, they cannot explain how they are able to anticipate the next in the sequence. They have learned the pattern, but cannot explain it: their learning is implicit. My sense is that successful traders develop a feel for the market the same way
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This note was uploaded on 08/11/2009 for the course FINANCE Fixed Inco taught by Professor Proflim during the Three '09 term at University of Adelaide.

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Information Processing and Trading - Information Processing...

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