Friday, December 26, 2014

Best Practices in Trading: Reading in Parallel

With today's post, I'll begin a series on best practices in trading.  Those will include some of my own, as well as those submitted by generous readers.  My hope is that at least several of those best practices can inform your trading processes for 2015.

Above is a live 5 AM snapshot of my home office.  There are 16 books on the floor in various phases of being read and 41 books on the window box that have either been read or are on tap for next reading.  The books cover three topics:  happiness and well-being; the mastery of change; and creativity.  These are the themes that are central to the book I'm writing.

When I'm not writing a book, there are fewer books tossed about the office, but there are always a few.  What I'm doing is reading in parallel:  reading one book and then going to the other books to see what they say about the topic.  That is why I read the actual print books rather than the electronic versions:  it is easier for me to bookmark the texts and read them side by side if they are right in front of me.

Reading in parallel means that I rarely finish a book from start to finish.  I quickly scan the books and find an anchor text:  one that seems unusually well researched and well written.  The anchor text guides the selection of topics.  I read about the topic I find most interesting and relevant in the anchor text and then move to the other books to read whatever they say about the topic.  This creates a virtual conversation among the authors, as I view the topic through each of their lenses.

When I stop reading new and interesting material on the topic, I move to the next topic.  The reading never is boring for that reason.  As soon as I start to lose interest, I take a short break and switch topics, usually returning to the anchor book.  The most interesting and relevant ideas that I encounter are bookmarked and written down, often in Evernote.

The inventor Thomas Edison filed over 1000 patents during his career.  He held himself to a discipline in which he and his assistants were required to generate one minor invention every ten days and one major invention every six months.  By churning out more inventions, he raised the odds of achieving at least a few significant inventions.  Similarly, by reading material from a number of books in a dedicated time period each day, we expose ourselves to more ideas--and then have more ideas to draw upon in generating our own.

Having worked this way for years, I've become unusually good at skimming books, identifying their main ideas, and deciding if they are worth reading in detail.  The same process applies to research papers or online articles on a particular topic.  This efficiency means that you can cover more high quality material than the average person--and that you become better over time at identifying high quality material.

Reading a book is like having an expert visit your home for a conversation.  Reading in parallel is like inviting a group of experts to your home and participating in their conversation.  The acid test for reading in parallel is whether you come away from the exercise with perspectives that are contained in none of the individual texts.  That is when reading becomes a truly creative exercise.

Further Reading:  Best Practices During Trading Slumps