My favorite story is a study that involved trying to predict the outcome of a 1:2 random distribution. Pull a random card from an infinite deck, 1/3rd of the time it's black, 2/3rds of the time it's red. The optimum strategy is to guess red all of the time; you will be right 2/3rds of the time. Humans have a tendency to try to match the random number generator, guessing red 2/3rds of the time and black 1/3rd of the time, which is sub-optimal, and you're only correct 5/9ths of the time.
We're powerful pattern matchers, yes: we can observe a 1:2 random distribution and mimic it pretty accurately. But we're also a little stupid: we think it's a good idea to do so.
Maybe traders have learned on an intuitive level to "fix" this pattern matching - clearly the processing circuitry / power / ability is there, so a trained difference in outlook could allow us to harness it properly.
My favorite story is a study that involved trying to predict the outcome of a 1:2 random distribution. Pull a random card from an infinite deck, 1/3rd of the time it's black, 2/3rds of the time it's red. The optimum strategy is to guess red all of the time; you will be right 2/3rds of the time. Humans have a tendency to try to match the random number generator, guessing red 2/3rds of the time and black 1/3rd of the time, which is sub-optimal, and you're only correct 5/9ths of the time.
We're powerful pattern matchers, yes: we can observe a 1:2 random distribution and mimic it pretty accurately. But we're also a little stupid: we think it's a good idea to do so.