Here's an article from Bloomberg about why introverts win as traders ... I wish I could have just linked to it but the way Bloomberg does links is just mpossible! So here's the article in full quote from BLOOMBERG.
Here's How You Can Get a Bigger Bonus Next Yearby Mark GilbertDec. 23 (Bloomberg) -- Disappointed with your 2004 bonus? Traders, it's time to ditch those New Year resolutions to build bigger biceps or slim that waistline, and give your personality a workout to earn more in 2005.
Be an introvert. Keep your emotions stable. Stay open to new experiences. Oh, and try not to be misled by randomness, stop thinking you are in control of the situation, and don't expect any help from your boss.
Those are the conclusions of a study on what makes a good trader by four U.K. academics specializing in psychology and behavioral science. To get answers, the quartet interviewed 118 London-based traders and managers -- only two of them were women - - from four unidentified investment banks, three with U.S. headquarters and one based in Europe.
The researchers are trying to fill an information gap. They discovered that while banks are willing to pay millions of dollars to their top profit-generators, they don't know how to spot or develop potential Masters of the Universe. Until he goes ``ka- ching'' or ``ka-boom,'' a trader's bosses have no idea whether they have hired a star or a turkey.
Are You Special?
The traders and managers we spoke to were almost all clear that superior performers had 'special' qualities, and yet no-one was able to articulate clearly the precise set of skills and attributes implicated,'' the researchers wrote in their book. There seem to be few resources directed toward identifying what makes a top trader, despite intense speculation on the subject, the large costs of recruiting a new trader and giving them several years to see how potential develops into skill.''
The results of the study are in a new book,
Traders: Risks, Decisions and Management in Financial Markets (Oxford University Press, 244 pages). The authors are Mark Fenton-O'Creevy, senior lecturer in organizational behavior at the Open University Business School; Nigel Nicholson, professor of organizational behavior at London Business School; Emma Soane, senior lecturer at Kingston Business School; and Paul Willman, a professorial fellow of Balliol College, Oxford.
Using interviews, questionnaires and tests, the researchers tried to find the personality traits that make some traders more successful than others. "Personality accounts for significant variation in earnings,'' the investigation found. "
The higher performing traders in our sample are emotionally stable introverts who are open to experience.''
Keyboard ImpotenceOne of the tests featured a chart on a computer screen. The line on the graph started at zero, and then increased or decreased every half-second for 50 seconds. The traders were told that pressing keyboard keys Z, X or C might affect how the chart developed. When the chart stopped moving, they were asked how much influence they thought their typing had on the chart.
The test was a placebo. The typing had zero effect on how the graph developed. While some traders realized the chart was predetermined, others were convinced they had full control. (The mental image of a guy in shirtsleeves bashing impotently at a keyboard, convinced he's making a difference, is very appealing. Not so different from what he does for 10 hours a day, maybe.)
"The results produced a statistically significant negative association between illusion of control and both total remuneration and desk profits, but not risk management, analytical ability or people skills,'' the authors wrote. "There is a clear case for saying illusion of control is associated with poorer performance and lower earnings.''
In other words, while the traders fooled by the graph were as competent as their less gullible peers, their earnings were typically lower.
Thick-Skinned Introverts
When everyone else is selling, there's often money to be made by buying, and vice versa. You have to have a thick skin, though, to go against the crowd. "
Introversion insulates traders against social distractions including the need to be liked and accepted; useful especially where there is a need to seek or tolerate contrarian positions,'' the academics said.
They also found that traders' behavior typically changed as bonus time approached. "Traders expecting a good performance (and thus bonus) outcome will be reluctant to put those anticipated gains at risk, whereas a trader anticipating a poor outcome will be more willing to take risks that avoid that negative outcome,'' they said.
"Training-Free Zone"
Think your boss is useless? You may well be right. The authors reserved their most scathing comments for the way trading rooms are managed.
"Trader management is a training-free zone,'' they said. "In a combined 70 years of experience, the authors have never encountered so little management development in sophisticated organizations of vast resource.''
Banks are happy to leave traders alone provided they are making money. Managers only intervene when a trade has gone sour; post-mortems are held when money is lost, with scant investigation of why some trades are profitable.
"The combination of trader autonomy, reliance on bonus and management spans of control generates an environment where managers see themselves as a safety net rather than as creators of value or profit,'' the professors said. "Put another way, trading environments rely too much on managing outputs.''
If the 2004 bonus fell short, try these New Year resolutions from the authors to shake the money tree harder next year:
- -- Trade more often; the study suggests the best way to test a market hypothesis may be to implement it in a trade, securing long-term learning benefits from taking on short-term risks.
- -- Spend as much time examining your profitable trades as you do autopsying your failures.
- -- And try to stay cool when your spreadsheet is awash with losses. Losing money makes you want to "avoid its recurrence at all costs,'' the study says, even when random events are the cause. In other words, sometimes, stuff happens; it's not always about you.
We've been saying this for years. See our article on Warren Buffet and the characteristics which made him one of the richest men in the world.
Also see TOPTEN Ways Warren Buffet is the World's Greatest Investor AND INTROVERT
