I want to thank Abnormal Returns for passing along this excellent New York Times article on the role of habits in learning and creativity.
The article highlighted a few ideas that I think are very relevant to the development of trading expertise:
1) Much of performance learning is the cultivation of positive habit patterns - If you have to make efforts to follow trading rules, that is effort not devoted to tracking markets. The key to success is turning rules into habits, so that they can be followed without effort, preserving mental capital for analysis and decision-making.
2) The development of new habits opens the door to fresh ways of thinking and behaving - I've long noticed that successful traders periodically remake themselves and their trading, adapting to changing market conditions. They cultivate new habits, which aids them in developing new skills and ways of making money.
3) We will learn and perform best by making maximum use of our learning strengths - This is an extension of the notion of operating within a trading niche. If we're engaged in a concerted program of learning and development, it makes sense to ground our efforts in learning competencies.
4) Performance improvement often occurs in small, continuous steps forward - This is an idea central to quality and performance improvement among manufacturing firms. The successful trader may set a single goal each trading session and track progress faithfully. Over the course of a year, that is hundreds of opportunities missed by the trader who lacks such goals. Take a look at this excellent New Yorker article on Toyota and the notion of kaizen. The path of kaizen is difficult to follow, but it's a sure path to excellence.
Trading Psychology Observations