Sunday, February 11, 2007

Best Practices in Trading: Response to the TraderFeed Poll

I recently polled TraderFeed readers for their interest in using the blog to integrate discretionary and quantitative/systems aspects of trading. Having seen how the collaboration of traders with good ideas and developers with the programming ability to improve those ideas has been helpful to both, I thought I might make such collaboration more widely available to interested traders. My experience has been that identifying trading patterns is useful in capturing the personality of the market, yielding worthwhile trading ideas. Experienced, successful traders know (sometimes intuitively) what those patterns are; successful system developers can cull and test that knowledge and expand upon it by adding from their own bags of tricks. If such collaboration produces even a small, consistent edge, that can be enough to generate meaningful profitability.

Readers provided many thoughful responses to this idea, posted to the blog and directly emailed to me. The gist of the feedback was:

1) There is a considerable demand for quality education from experienced traders - Almost all the responses were complimentary regarding this blog and its emphasis on trader development. Respondents expressed what I would call a desire for training--teaching of hands-on skills--as opposed to a simple dissemination of information. Most responses were very positive on the idea of trader collaboration, though there was considerable difference of opinion over what should be shared and how.

2) There is considerable skepticism regarding the majority of trader education efforts currently available - If I had to summarize the feedback in a single sentence, I'd say that a very high proportion of traders don't perceive value in the majority of conferences, books, and mentoring services that are out there. These are perceived as overpriced and/or lacking in practical, useful how-to skills. I have heard a number of accounts of questionable services costing thousands of dollars, well beyond what is prudent for beginning traders to spend as overhead.

3) There is widespread skepticism over my idea regarding using signals from backtested trading systems as tools for decision support - The most common concern mentioned was that these signals could become a crutch, rather than an encouragement to original thinking. The signals were perceived--understandably--as not being of true educational value if they are not accompanied by the underlying system logic. Among system developers, of course, there is a great reluctance to share such system logic and potentially diminish its value. Many traders are also concerned that signals from systems could become invalid over time as markets change.

I have taken a few days to think carefully about this feedback, and I've benefited from consultation with a number of colleagues whose opinions I value. Here is my proposal to move forward with collaborative trader education:

I propose that we begin a special blog feature called Best Practices in Trading. Best Practices posts would be so identified in their title and would describe how-to skills and methods that have been helpful for traders. The novel feature in this proposal is that any TraderFeed reader is free to submit a Best Practice for inclusion on the blog. (Procedure for submission appears below). Experienced traders who would like to be contacted by a programmer for collaboration (or vice versa) could share an idea and connect for their own mutual learning (just as I recently placed the experienced trader in touch with Henry Carstens to improve his trading rules). Beginning traders could share learning strategies, setups, exits, and psychological techniques that are working for them and then receive feedback from many experienced readers who could offer further suggestions.

The Best Practices feature would accomplish several goals:

1) It would capture the knowledge and experience that each of us possess and stimulate interactions to further those;

2) Archived over time, it would provide a meaningful trading knowledge base;

3) It would provide traders, bloggers, and vendors with a sizable audience of several thousand readers for rich feedback (much as I benefited from the poll feedback);

4) It would expand the coverage of this blog to a variety of markets and trading strategies, enriching all of us.

Here's how it would work:

To submit a "best practice", you would simply email me (my address is at the end of the "About Me" section at the right hand side of the TraderFeed home page), placing "Best Practice" in the subject header. Your best practice would be briefly described in the body of the email, providing enough information to enable readers to try out the idea for themselves. I would copy the material into the blog, add my own, separate commentary and ideas, and post for everyone to see and respond to. If you want the "best practice" to appear under your authorship, you would include your name and a brief bio blurb. If you wanted readers to contact you directly (optional), you could include your contact information in the bio. I would format it in the post so that bots don't pick it up and deluge you with spam. Alternatively, if you'd rather remain anonymous or just have readers respond to your idea through the comment section of the blog, that would be fine too.

Groundrules for submission:

1) I will review all "best practice" submissions. I welcome submissions from other bloggers and from vendors of trading products and services as long as the submissions have clear educational content and are not primarily for self-promotion and advertising. I will happily include links to the blogs/sites of those who contribute entries. Submitted items should describe practices in how-to terms as much as possible, while staying within a reasonable reading length. If I need to edit a submission substantially (not just for wording), I would ask your permission in advance. I will exercise quality control over submissions and I will not permit flaming of other people's comments or ideas.

2) You are free to post your own submissions simultaneously to your own blog or site; if you do, I'll link to your URL. I do request that others not publish the best practice material on their own sites without the author's expressed permission. I will not use submitted material for any publication purpose other than the TraderFeed blog. I'm not looking to profit from others' work. Everything on TraderFeed will remain free of charge.

3) If you provide me with your contact info, I will not share it with any other groups. I do not maintain a subscriber list, and would never sell email information to advertisers or other groups.

4) Over time, I will create a separate archive of Best Practice posts so that readers will find your work in the future.

TraderFeed currently averages about 1700 unique reader visits per day. A similar number of readers access my personal site. If only 10% of readers contribute one good idea, we would have quite an online encyclopedia of trading methods--at no cost, other than the time it takes to write an email. I ask that readers challenge the premise that expertise is something possessed by others. You have gained experience, and you have learned. If you can share the expertise you've already acquired--modest though that may seem--you will help to advance others, and you will attract the comments and suggestions of others who might be of help to you.

I will get the ball rolling on Monday with an initial best practice post, so you can see what one might look like. Then, if you decide to contribute, you can email me with your basic idea before writing it up and I can make suggestions for your entry. In most cases, I will provide personal feedback to traders who submit "best practices" as well as commentary on the post.

Of course, I welcome comments and suggestions regarding this blog feature and am happy to make modifications to meet readers' interests and needs. My goal is to make trader education a social process, rather than a one-way stream of information from a self-anointed guru to a relatively passive group of receipients. My hope is that, among ourselves, we can generate more solid ideas and superior learning and training than could be accomplished through any number of expensive and ephemeral seminar/workshop/coaching events.

Thank you so much for your interest. I look forward to this collaboration.

Brett

8 comments:

yinTrader said...

Hi Brett

Although I do not qualify to participate in your new Blog, being a novice online trader of a year, I think it will serve to enhance our trading at whatever level.

I look forward to reading this new Blog as I believe my mentor will participate whenever.

Good start to the Year of the Pig- Feb 18, 2007!

Bulls and Bears make money, only Pigs get slaughtered.......... your new Blog is timely to come to the rescue!

Brett Steenbarger, Ph.D. said...

Hi Yin,

I really appreciate your interest and hope we all can avoid slaughter in this Year of the Pig! While I understand that you're a novice, I suspect you have some insights regarding lessons you've learned (sometimes the hard way!) that you could pass along to other novices. I'd welcome your participation if inspiration strikes!

Brett

LifePost said...

"My goal is to make trader education a social process"

I'm really looking forward to this new blog. I don't have the ability to backtest and give statistically based trades right now, but I look forward to being able to share some of my own ideas and being able to look at other traders' ideas as well.

Brett Steenbarger, Ph.D. said...

Hi LifePost,

If I get enough submissions, I'll probably turn the "Best Practices" into a separate blog altogether. For now, it will be a feature on the TraderFeed site. I'd enjoy getting a submission from you regarding one of your ideas. If you'd like to try to connect with other traders, do indicate in your post. Thanks for the interest!

Brett

D TradeIdeas said...

An excellent series idea. I look forward to reading and contributing! If I'm correct about the series' premise, many of the ideas behind the strategies from our 'Strategy Sessions' series would be appropriate material.

Lauriston said...

Brett

Quite seriously, this could turn out to be the best contribution to the field of trading, probably ever! Will beat the Internet and many changes in securities laws that have given small traders access to the "Old Boys' Club". Why? Because all the other efforts only give access to small traders to lose their shirt, whereas your efforts will help traders in their pursuit of making money!!! Thanks for all your fantastic effort.

Brett Steenbarger, Ph.D. said...

Hi David,

Yes, you're absolutely correct. Ideas behind the strategies would be fantastic "best practice" entries, and I'd love to have your participation. Thanks!

Brett

Brett Steenbarger, Ph.D. said...

Hi Lauriston,

I really appreciate your interest and support. I have been pleased with the response to the best practices idea so far and hope that we can sustain a flow of high quality ideas. Thanks!

Brett