Saturday, July 21, 2007

Assessing the Learning Styles of Traders

My recent article examined the role of learning styles in trading, and I extended the discussion to trader performance on my personal site. Here's a further resource: the Index of Learning Styles (ILS) questionnaire. Unlike the VARK measure linked in my initial post, the ILS assesses learning styles across four bipolar dimensions:

* Active - Reflective
* Sensing - Intuitive
* Visual - Verbal
* Sequential - Global

You can take the questionnaire online free of charge. Here's an article about the background of the measure.

I came out to be very high in Reflective, Intutitive, Verbal, and (somewhat) Global. That strikes me as quite accurate. I'd love to see a more comprehensive assessment that evaluates how people sequence these various learning modes. For example, I tend to think quite a bit (Reflective) about the big picture in the market (Global) by reading and writing about the economy and various markets (Verbal), but then my actual entries and exits have a strong Intuitive component. I suspect other traders blend these learning modalities differently. The question is what works for each trader. I don't see a lot of attention placed on that in the trading world.

My best guess is that we would see meaningful differences in learning styles between mechanical systems traders and discretionary traders and between short-term traders and longer-term investors. Just as learning styles differ for people going into particular occupations, it's likely that they differ for people selecting different modes of money management.

Do traders approach decision making differently (from a learning style/information processing vantage point) when they're trading well vs. trading poorly? My own trading results are much poorer when I haven't done considerable preparation/research in advance of the market open. That makes sense, given my need for Verbal, Global, Reflective processing to support my Intuition. This strikes me as a fruitful area for research--and self-study.


AnaTrader said...


I filled the questionnaire quickly and came out as :

Active /Relective ...R v strong pref
Sensing /Intuitive...I v strong pref
Visual/Verbal ...... Visual moderate pref
Sequential/Global....G moderate pref

What do you make of my quick results?


Dogwood said...

Thanks for the link, I've always found these types of questionnaires interesting.

For the record, I am balanced in Active/Reflective (1), very strong intuitive (9), very strong visual (9), and moderately global (7).

Brett Steenbarger, Ph.D. said...

Hi AnaTrader,

Your profile is similar to mine, only you're stronger in visual and I'm off the charts high in verbal. I would expect that you'd benefit from seeing markets (charts, indicators) and from studying them (reflective) to aid your intuition. Getting a handle on bigger picture trends in the market (global) might also be useful. Where I differ is that I use research (quant) in place of charts and visual aids.



Brett Steenbarger, Ph.D. said...

Hi Dogwood,

Intuitive and visual: I suspect that's a pattern displayed by many discretionary traders who make use of chart patterns, indicators, etc. Studying those to obtain a big picture view of markets (global) might be especially helpful. Thanx--


Evan said...

An interesting test for an early Sunday! So far the commenters have been Intuitive and I showed up as Sensing. Here's the scorecard:

Active - 5
Sensing - 9
Verbal - 7
Sequential - 3

Brett Steenbarger, Ph.D. said...

Hi Evan,

I suspect many quant traders and system developers score high in sensing. Amazing how different personalities/styles can find niches in the financial world.


x said...

Interesting test and here's how I came out of it:

Reflective: 5
Sensing: 7
Visual: 11
Sequential: 3

I wonder what this says about my trading style? That I learn best from seeing patterns?


Brett Steenbarger, Ph.D. said...

Hi Jordan,

Yes, seeing and analyzing patterns would be the preferred mode!


AlvaroF said...

Hello Brett,

Very useful. You may also want to take a look at my interview on te biology of learning and the "learning cycle"-it can help with your sequence comment:

(JZ is James Zull, a neurobiologist)

AF: What is Learning? Can apes really learn in the same way we do?

JZ: Learning is physical. Learning means the modification, growth, and pruning of our neurons, connections–called synapses– and neuronal networks, through experience. And, yes, we have seen that apes go through the same Learning Cycle as we do, activating the same brain areas.

AF: How does Learning happen?

These are the 4 stages of the Learning Cycle.
1) We have a Concrete experience,
2) We develop Reflective Observation and Connections,
3) We generate Abstract hypothesis,
4) We then do Active testing of those hypotheses, and therefore have a new Concrete experience, and a new Learning Cycle ensues.

In other words, we 1) get information (sensory cortex), 2) make meaning of that information (back integrative cortex), 3) create new ideas from these meanings (front integrative cortex) and 4) act on those ideas (motor cortex). From this I propose that there are four pillars of learning: gathering, analyzing, creating, and acting.

This is how we learn. Now, learning this way requires effort and getting out of our comfort zones. A key condition for learning is self-driven motivation, a sense of ownership. To feel in control, to feel that one is making progress, is necessary for this Learning Cycle to self-perpetuate. Antonio Damasio made a strong point on the role of emotions in his great Descartes' Error book.