Monday, October 30, 2006

What Traders Most Need

Rarely does a week go by without my receiving a solicitation to provide online "education" for traders. My response is generally the same:

Traders don't need education. What traders most need is training.

Look at all the websites, blogs, and books devoted to trading. If success were a function of education, surely we'd see a helluva lot more profitable traders.

No, giving a struggling trader blog columns and newsletter articles is like giving a starving man a menu.

That's not to say that education is unimportant. Look at successful training programs--in medicine, music academies, the military, sports--and you'll see evidence of hands-on teaching. But no one pretends that you will make a surgeon, violinist, fighter pilot, or quarterback by conducting seminars and providing written material.

Training builds upon education by providing structured opportunities to learn by doing. The psychotherapist in training sees role-played clients--and then real ones--while being observed by a mentor/supervisor. The surgeon trains with a senior physician: see one, do one, teach one is the motto. A violinist is assigned pieces by a teacher and executes these many times in practice and in lessons before performing at recital. New fighter pilots spend many hours in simulated aircraft and then in the cockpit with an experienced pilot before being given their own jet. The quarterback not only sees plays diagrammed, but runs these time and time again in practice under the watchful eye of the coach prior to using those plays in a game.

Trading, like those other fields, is a performance skill--not merely a body of knowledge. Education informs; training develops skill. If skill were a matter of explicit knowledge and learning, the most informed athlete or trader would also be the best one; we could give IQ tests and predict performance.

In the near future, building upon the release of my book on trading performance, I will be incorporating more training features into this blog and and into my personal site. The morning sessions with the Doc (the next scheduled for tomorrow) are but the first step. Intensive daily review of trading patterns/setups to train your eye for opportunity are another step.

Ultimately, however, what traders most need is to be observed--in real time--as they trade, with immediate feedback and instruction. That's the training doctors, athletes, and pilots get. How to provide such training economically is a thorny logistical problem I'm working on. It's a lot easier to write articles and offer seminars and pretend that those, by themselves, will enhance trader performance. But the success rate among new traders bears eloquent witness to the limitations of such a strategy.


Carl said...

Hear, hear!

I agree with your assessments. I am new to trading. My experiences thus far have revealed a wide divide that separates "knowing" what to do from "doing" what I know/plan.

I am seeing that ineveitably success reduces to daily *work* or as you describe training: trading a plan, tearing down succesful and busted trades, learning from each experience, refining methods, and moving forward.

Brett Steenbarger, Ph.D. said...

Hey Carl,

If you understand that, you're already ahead of the many beginners who are convinced that they'll find the holy grail by attending the next great seminar or trying the latest wrinkle on a chart formation.

Knowing and doing are, indeed, quite different things: I can know a lot about a combustion engine, but not know how to fix my car. As I have told my trading students at a prop firm, not every trade can be a winner, but if you don't learn from your trades, they are definitely losers.


Michael said...


I get a lot of questions and requests about coaching as well. I'll be very interested to see your ideas on solving the logistical problems.

Brett Steenbarger, Ph.D. said...

Hey Mike,

I'm sure you'd do a fine job as a mentor. The logistics of mentoring remote traders are more thorny than those of mentoring traders within a firm. Having run a training program for traders at a prop firm and been part of medical and psych graduate training programs for 20+ years before that, I've developed a few feeble thoughts on the matter... :-)

Feel free to contact me directly if you're interested in brainstorming. Anyone who could do this right would be providing a real service to the trading community--


TraderEyal said...

I totally agree. One of the things that helped me in moving from learning to making money was imagining that a mentor was watching over my shoulder during the trading session examining and commenting on everything I did in real time. So almost every action was evaluated from a "what would my mentor say about this" point of view. It also helped that I did have someone specific in mind for the role :)

Brett Steenbarger, Ph.D. said...

Thanks Trader Eyal,

You make an excellent point. Mentorship allows a learner to internalize the voice of the mentor, and when you have several mentors, you can blend those voices into a way of performing that becomes your own. Asking traders to train themselves at home to compete against professionals at hedge funds and banks is like asking people to train themselves at home for the Olympics. It is a crying need that goes unrecognized, with "education" in the form of seminars, websites, and chatrooms offering poor substitutes.


Hunting R said...

This article makes you take a different view of what it takes to "make it" in this job. After reading this I could not help but to reinforce my thinking that people need to take around who they are as a person. There’s no book or seminar out there to help you with this, it only comes from experience. The beauty of trading is it gives you all the experience you want, just make sure to understand risk control so you have the time needed to get your experience.

Brett Steenbarger, Ph.D. said...

Hello HuntingR,

You've said it more eloquently than me: So much of success is surviving your learning curve, giving yourself enough time to achieve mastery by controlling risk. Experience is indeed the great teacher if we can just structure it properly! Thanks for the note--