Wednesday, October 03, 2007

Three Steps Toward Becoming Your Own Trading Coach

A theme I emphasize in all my interactions with traders is that I don't want to be their trading coach. Rather, I want traders to learn skills that will enable them to coach themselves.

What steps can developing traders take to better coach themselves? Three come to mind immediately:

1) Create a Split - When you are serving as your own coach, you are both performer and evaluator of performance. You're both player and coach. That necessitates the creation of mechanisms to split the player from the coach and enter the mindset of evaluation, goal setting, and learning. The most basic way of creating such a split is to devote a set time each day for review of performance, journaling, and setting goals for near-term improvement. I've found that the time and effort devoted to these activities is positively correlated with a trader's success. Such traders have created an effective split that enables them to stand back and view themselves objectively.

2) Always Be Working on Something - I like to ask traders: What, specifically, are you working on today? The fuzzier the answer, the less likely it is that real learning and performance improvement will occur. It might be working to extend a strength or to correct a weakness; it might be work on one's trading or on one's mindframe. Regardless, the idea is to make every trading session a learning session.

3) Make Yourself Earn Size - Don't trade larger until you have established success and confidence with smaller size over a period of different market conditions. When you've earned a bump up in size, make it gradual enough so that it doesn't take you out of your game. Conversely, if you're experiencing a slump due to personal reasons or shifting market conditions, be quick to pull your size back until you regain your feel. Consistency of returns--and achievement of good risk-adjusted returns--are the goals.

You can only be a good coach for yourself by practicing your self-coaching. I've met many traders who were drawn to trading because of a perceived easy lifestyle: ability to make lots of money with short working hours. Of all the traders I've known who were attracted to trading for those reasons, I've seen none succeed over the long haul. If you're spending screen time learning market patterns and then spending self-coaching time mastering yourself, honing your execution, and developing fresh strategies, you know the lifestyle associated with success!

RELEVANT POSTS:

Becoming Your Own Trading Coach

The Most Important Step in Self-Coaching
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2 comments:

jonnels said...

Can't agree more with number 3. I don't understand when traders arbitrarily pick a number of shares to trade or a percent of equity to risk. If you can't trade correctly with one share, how can you trade correctly with 1000.

bruce said...

Excellent advice. Thank you!