Science just gets more and more
amazing, especially whenever you mix biology with economics. Some scientific
research has suggested that comparing your ring finger (4D) with the size of
your pointer finger (2D) can accurately predict how good of a trader you are.
What
Is The Digit Ratio?
The ratio between the size of your
pointer and ring fingers is known as the 2D:4D ratio. If your pointer finger is
shorter than your ring finger, then you have got a Low Digit Ratio. And that is
the specific ratio we are going to focus on today.
While in the womb, fetuses are
exposed to various androgens, such as testosterone. This exposure has been directly
correlated to finger growth. Those that have a ring finger longer than their
pointer finger likely experienced much more testosterone and other androgens in
the womb.
Prenatal testosterone and androgen
levels have been shown to have a drastic effect on males when it comes to
everything from athletic ability to confidence and risk tolerance.
Why
Does A Lower Digit Ratio = Potentially Successful Trader?
There is a huge psychological
component when it comes down to being a successful trader. Successful trading
takes more than just a thorough understanding of the markets and its asset
classes. To be a successful trader, you must also possess a few psychological
traits:
●
Confidence
to “place bets” that may be deemed risky
●
Risk
tolerance to risk significant amounts of money
●
The
ability to process data and information quick enough to outpace your
competitors
The digit ratio correlates with
athletic ability, and that is true as well for successful traders. An average
person would get exhausted after just an hour of trading when the market opens.
A wildly successful trader can remain extremely alert and vigilant enough
throughout the day so that they can process information quickly and make
decisions on a whim, all without tiring out.
Day traders that engage in a
high-frequency, fast-paced atmosphere are even more sensitive to these rules or
biological traits. They must always be on their toes and keep themselves in a position that lets them react faster than their competitors before specific
deals have been arbitraged away.
Low
Digit Ratio and Success: The science and data behind the claims.
We knew in the past that a longer
ring finger meant you were likely exposed to more prenatal testosterone and
other androgens while in the womb. This increased sensitivity to these hormones
in the womb would lead to increased sensitivity to them as an adult. Heightened
sensitivity means that your body can more efficiently process the testosterone.
This increased sensitivity to
androgens had been proven in the past to show a direct correlation with quick
reflexes and risk-taking impulsiveness. These two characteristics are crucial for
successful traders on Wall Street. A former trader and cognitive scientist
named John Coates out of Cambridge in the U.K. wondered if there was some
correlation between all of this.
In a previous study, Coates and his
colleagues learned that traders who have a higher amount of testosterone in the
mornings, when the market opened, were much more successful than those with lower
testosterone. He now wanted to see how the digit ratio came into play with all
of this.
For the first round of the study,
Coates and his colleagues identified 44 professional Wall Street traders, took
their handprints, and measured out their digit ratios. They also took
handprints of a control group. All the traders were monitored over a 20-month
period, and, upon seeing the results, Coates remarked, “I almost fell out of my
chair. I could not believe what I was seeing.”
Traders with a lower digit ratio
(longer 4D or ring fingers) averaged $1,232,590. This was almost six times more
than those traders with a higher digit ratio (shorter 4D or ring fingers).
These results allowed scientists to look at successful trading as something
more along the lines of natural selection because of the psychological traits
required.
Digit Ratio Does Not Stack Up?
Then
do not worry! This study only looked at one specific kind of trading. (Day
Trading). Being a successful trader overall goes way beyond possessing the
psychological traits needed to become a successful day trader.
