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AN INSIGHT
TO DAY TRADING

UNDERSTANDING THE EFFECT OF BOREDOM IN DAY TRADING


Professional day trading requires discipline and patience. Often traders are confronted with boredom in day trading due to longer waiting periods that may lead to trading activity outside the actual trading plan. A deeper understanding of boredom and its effects can help improving the own behaviour in critical situations.


STUDY RESULTS

In collaboration with colleagues from the University of Virginia and Harvard University psychologist Timothy Wilson investigated the effect of brief periods of time alone in a room with nothing but the own thoughts. In their study, individuals were asked to put their belongings like mobile phones, pens, keys away and spent 6 – 15 minutes in a sparsely furnished room. One group was asked to think about something specific like dinner and plan it in during the given time period, the other group was left without any further suggestions and were told to think whatever they want to.


Subsequently, the participants were asked to rate their experience. About 50% of both groups did not like to experience respectively “thinking period” and reported difficulties to concentrate as well as an enjoyment level at or below the midpoint of the rating scale while giving high ratings of boredom.


In a first review, Wilson did not necessarily attribute the result to the fast pace of modern society or prevalence of available electronic devices like smartphones but assumed the device might be a response to the people’s desire to always have something to do.


Then, researchers took their study a bit further. Since most people indicated the preference of having something to do rather than just thinking, the researchers went after the question whether the participants would even prefer an unpleasant activity than no activity at all. The previous experiment was repeated but a device to give themselves a mild electric shock by pressing a button was placed in the room. Before continuing the study, all participants received a sample of the shock and stated they would pay to avoid being shocked again. Still, in the experiment 12 of 18 men gave themselves at least one electric shock during the 15 minute “thinking” period. In contrast, only 6 of 24 females shocked themselves.


CONCLUSION

Finally, the research team concluded simply being alone with their own thoughts for 15 minutes was apparently to aversive that it drove many participants to self-administer an electric shock that they had earlier said they would pay to avoid. Also, the experiment indicated that men tend to seek “sensation” more than women by referring to the 67% of men giving themselves as shock compared to 25% of women.


In day trading waiting is part of the business. Having the study results in mind it can help to better understand the human brain and behaviour. Waiting for a trade opportunity can be challenging since the mind does not like being bored and craves for engagement. A result of that phenomenon can be entering trades that are not in-line with the initial trading plan respectively entering trades out of boredom. Consequently, traders must be aware of those mental pitfalls in order be prepared and develop an advanced set of mental skills. Understanding the importance of patience in day trading and improve focus can be ways to better deal with the pitfalls the human brain has ready for us.