Lucky button
Three keys. One price line. Can you push it up?
Six rounds. In three of them you get three keys, Z, X and M, that might push the price up. In the other three you just watch. Then you rate how much your keys helped.
Why the keys felt like they worked
In 1973 the psychologist Ellen Langer had an office lottery run at two firms on Long Island. Tickets were football cards at $1 each, and the pot was about $50. Some workers picked their own card. Others were handed one. On the morning of the draw, each was asked what they would sell their ticket for.
The 27 who had picked their own card asked $8.67 on average. The 26 who were handed one asked $1.96. Every ticket had the same chance. Choosing it did nothing, but it felt like skill. Langer called this the illusion of control.
Your keys work the same way. The line moves while you press, so some presses are followed by a rise. Those are the ones you remember.
The same game in a trading room
This game copies a test that Mark Fenton-O'Creevy and three colleagues gave to 107 traders at four firms. A line moved across a screen like a price. The traders had three keys and were told to push it as high as they could. They were warned it moved at random, but that the keys might have some effect. The keys had none.
Each trader then rated how well they had done. The traders who gave themselves the most credit were the weaker traders. Their managers rated them lower on analysis, risk management and contribution to profits, and they were paid less.
So the feeling of control was not a sign of skill. For those 107 traders it was a sign of the opposite.
When a trade works, ask: would it have gone the same way if I had done nothing?
Sources
- Ellen J. Langer, "The illusion of control", Journal of Personality and Social Psychology 32 (1975), 311–328. Experiment 2.
- Mark Fenton-O'Creevy, Nigel Nicholson, Emma Soane and Paul Willman, "Trading on illusions: unrealistic perceptions of control and trading performance", Journal of Occupational and Organizational Psychology 76 (2003), 53–68.
- The lines are made fresh in your browser: 40 fair random ticks each. All six are drawn before round 1, and the code is a fingerprint of their six closes.