Trader Psychometrics by 2KE0Yt3a


									     Presentation for CCFEA Summer School
                 3.15pm -4.15pm

                David J. Norman

‘Trader Psychometrics: The Realtime Assessment of
          Electronic Trading Behaviour’
Trader Psychometrics is the study, and ultimately the quantification, of electronic trader
behavior. Through the use of various algorithms, ratios and equations, an electronic
trader’s audit trail is captured and assessed realtime. Trader Psychometrics could be
described as a new field of behavioral finance as well as a subset of psychology. It is the
study of how traders make decisions to trade. The term ‘trader behavior’ encompasses a
multitude of elements including personality, level of risk tolerance, decision-making
competency, information assimilation ability, spatial awareness, pattern recognition, IQ,
emotional intelligence, cognitive performance, manual and mental dexterity, and even
humor and musical ability.

                                   Presentation format:

The presentation will feature details of the trader psychometrics discipline and the
implications of the research findings on current market activity and future industry
infrastructure design. The background to the research and the current use of trader
psychometrics in the financial services industry will also be discussed. In addition, the
presentation will detail the major groups of trader psychometrics which include analysis of
pre-trading and realtime trading metrics, time interval metrics, trading sequences, learnt
experiences and adaptation levels, restoration and recovery metrics, pattern recognition
qualities, confidence measures and information bias. Then the way in which trader
psychometrics enables the realtime digital evaluation of ‘Black Box’ automated trading
systems will be discussed and the ways in which newly created evaluation software will
shortly be able to positively modify black boxes realtime to enhance automated trading
system performance. The implications of using trader psychometrics for realtime electronic
trader and automated trading system performance evaluation and modification are truly
revolutionary and will change the shape of the financial services industry within a very short

Trader Psychometrics and trading data analysis

      A new academic discipline
      Methodology and ideology
      Pre-trading and post trading measures
      Research findings and implications

Market classification Measures
    Market classifications
    Momentum indications
    Random market Index
Realtime trading algorithms and metrics

      Time interval' and 'Time taken' Metrics
      Trading sequence measures
      Measures of confidence
      Pattern recognition
      Learnt experiences and adaptation levels
      Restoration and recovery metrics
      Explosive moments
      Information bias

‘Black Box’ automated trading system performance evaluation

      Realtime performance analysis via an API link
      Evolutionary learning techniques
      Positive modification via neural algorithms
      The implications for the industry

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