A new paper finds that day traders who play it cool regardless of whether they are winning or losing do better than those that take their wins and losses hard.

The paper from MIT Sloan School of Management’s Andrew Lo, Dmitry Repin of the MIT Laboratory for Financial Engineering, and Brett Steenbarger from the SUNY Upstate Medical University, Department of Psychiatry and Behavioral Sciences, investigates several possible links between psychological factors and trading performance in a sample of 80 anonymous day-traders.

It used daily emotional-state surveys and personality surveys to construct measures of personality traits and emotional states for each trader, and then correlates these measures with daily normalized profits-and-losses records.

“We find that subjects whose emotional reaction to monetary gains and losses was more intense on both the positive and negative side exhibited significantly worse trading performance,” the paper reports. The research doesn’t uncover a specific “trader personality profile”, which they conclude, “[raises] the possibility that trading skills may not necessarily be innate, and that different personality types may be able to perform trading functions equally well after proper instruction and practice.”

Between their research and other similar research, they conclude, “Typical emotional responses may be too crude an evolutionary adaptation for purposes of ‘financial fitness’, and as a result, one component of successful trading may be a reduced level of emotional reactivity. Given that trading is likely to involve higher brain functions such as logical reasoning, numerical computation, and long-term planning, our results are consistent with the current neuroscientific evidence that automatic emotional responses such as fear and greed often trump more controlled or “higher-level” responses.”

“To the extent that emotional reactions ‘short-circuit’ more complex decisionmaking faculties — for example, those involved in the active management of a portfolio of securities — it should come as no surprise that the result is poorer trading performance,” they say.

“Ultimately, we hope to provide a scientific basis for the kind of recommendations for trading success made by [previous research]: Be an introvert. Keep your emotions stable. Stay open to new experiences. Oh, and try not to be misled by randomness, stop thinking you are in control of the situation, and don’t expect any help from your boss.”