Thursday, February 26, 2009

Coaching Traders as a Supervisory Process

The last several posts have suggested that successful traders follow markets much like psychologists track the conversations of people they see in counseling. This implies that trading success is not so much a function of beating the market--and certainly not fighting the market--but rather listening to the market's communications. The effective trader attends to what is happening in markets--and what is not happening--in order to read patterns and themes in those market communications. What derails traders, like psychologists, is reacting to these communications in personalized ways, allowing one's own ego to get in the way of truly hearing the meaning of what is being communicated.

If this analogy holds, then the ideal coaching of traders might be less like conducting a counseling session than conducting a supervision session with a therapist in training. When a psychologist learns therapy in graduate school or a psychiatrist learns it in residency training, a core part of the learning experience consists of individual and small group supervisory experiences. An experienced faculty member reviews audio or videotapes of counseling sessions with the trainees, pausing at crucial junctures to point out what was communicated, what was done well, and what was missed. Typically, the supervision concludes with specific ideas of what to pursue in the next week's session, based upon the case review.

This supervisory process sensitizes the therapist-in-training to several things: what to listen for, how to generate ideas about people's core themes and conflicts, and how to intervene effectively at the right times (when people are most ripe for change). Such listening, conceptualization, and timing skills are surprisingly similar to the challenges that active traders face. Clinical supervision is a time and labor-intensive process, not unlike apprenticeships in the trades. It is, however, a time-tested framework for teaching performance skills that cannot be acquired simply by reading textbooks.

I am not convinced that the common models for coaching traders, which structures the learning process more like counseling sessions than supervisory ones--which treats the trader more like a client than a professional in training--is the ideal one. Might it be the case that we could meaningfully improve trader success by providing traders with "clinical" supervision, grounded in market and performance review? More on this topic to come.