Discoveries by cognitive scientists on randomness and human psychology and the increasing use of technology by casinos as well as stock/futures markets to manipulate individuals are just yet another reason why all trading teachers should have to go through a mandatory third-party vetting of their P&Ls over a multi-year timeframe, to show that consistency in day trading is nearly impossible with such a large distribution of data.
"Psychologists who study how the human mind responds to randomness call this the gambler’s fallacy — the belief that on some cosmic plane a run of bad luck creates an imbalance that must ultimately be corrected, a pressure that must be relieved. After several bad rolls, surely the dice are primed to land in a more advantageous way.
The opposite of that is the hot-hand fallacy — the belief that winning streaks, whether in basketball or coin tossing, have a tendency to continue, as if propelled by their own momentum. Both misconceptions are reflections of the brain’s wired-in rejection of the power that randomness holds over our lives. Look deep enough, we instinctively believe, and we may uncover a hidden order.
Recent studies show how anyone, including scientists, can be fooled by these cognitive biases. A working paper published this summer has caused a stir by proposing that a classic body of research disproving the existence of the hot hand in basketball is flawed by a subtle misperception about randomness. If the analysis is correct, the possibility remains that the hot hand is real.
Gamblers, with their systems and superstitions, sat nearly immobile at video slots, trying to outguess the algorithmic heart beating inside. They were immersed in what the anthropologist Natasha Dow Schüll calls “the machine zone.”
In her book “Addiction by Design,” she describes how modern slot machines are engineered to maximize “gaming productivity” — the velocity with which dollars fly from the players’ pockets. Mechanical levers have been replaced by faster, more efficient electronic buttons, while the simulated reels of cherries, bars and other symbols are programmed to give the illusion that you missed a jackpot by just a hair — fuel for the gambler’s fallacy.
But often the patterns we see are illusions. Some research has suggested that more excitable people are likelier to embrace the magic of the hot hand (go, go, go!) while those with “higher cognitive skills,” as the studies put it, are prone to the gambler’s fallacy — the belief that a run of heads will probably be followed by tails. Their swaggering brains think they have psyched out the system, discovering an underlying regularity."
http://www.nytimes.com/2015/10/18/s...-region&WT.nav=opinion-c-col-left-region&_r=0
"Psychologists who study how the human mind responds to randomness call this the gambler’s fallacy — the belief that on some cosmic plane a run of bad luck creates an imbalance that must ultimately be corrected, a pressure that must be relieved. After several bad rolls, surely the dice are primed to land in a more advantageous way.
The opposite of that is the hot-hand fallacy — the belief that winning streaks, whether in basketball or coin tossing, have a tendency to continue, as if propelled by their own momentum. Both misconceptions are reflections of the brain’s wired-in rejection of the power that randomness holds over our lives. Look deep enough, we instinctively believe, and we may uncover a hidden order.
Recent studies show how anyone, including scientists, can be fooled by these cognitive biases. A working paper published this summer has caused a stir by proposing that a classic body of research disproving the existence of the hot hand in basketball is flawed by a subtle misperception about randomness. If the analysis is correct, the possibility remains that the hot hand is real.
Gamblers, with their systems and superstitions, sat nearly immobile at video slots, trying to outguess the algorithmic heart beating inside. They were immersed in what the anthropologist Natasha Dow Schüll calls “the machine zone.”
In her book “Addiction by Design,” she describes how modern slot machines are engineered to maximize “gaming productivity” — the velocity with which dollars fly from the players’ pockets. Mechanical levers have been replaced by faster, more efficient electronic buttons, while the simulated reels of cherries, bars and other symbols are programmed to give the illusion that you missed a jackpot by just a hair — fuel for the gambler’s fallacy.
But often the patterns we see are illusions. Some research has suggested that more excitable people are likelier to embrace the magic of the hot hand (go, go, go!) while those with “higher cognitive skills,” as the studies put it, are prone to the gambler’s fallacy — the belief that a run of heads will probably be followed by tails. Their swaggering brains think they have psyched out the system, discovering an underlying regularity."
http://www.nytimes.com/2015/10/18/s...-region&WT.nav=opinion-c-col-left-region&_r=0
