Friday, May 22, 2015

The Power of Apprenticeship in Trading

The recent post discussed how we can turn our defeats into development.  Since writing that, I received an email from an accomplished prop trader who leads a group within the larger organization.  That trader had just sustained the worst losing day of his career.  So what did he do to address the situation?

He stayed constructive.  He wrote a detailed analysis of what he did wrong and how he will learn from the mistakes going forward.  His focus was on making sure this doesn't happen again, not on blaming external forces for his drawdown.  He took responsibility, but didn't stay mired in self-blame.

He reached out.  He sent his analysis to me and to the heads of his trading shop.  His commitment to improvement and learning from the setback thus became public.  He asked for a phone chat with me.  Done.  You can tell the workhorses from the show horses, because show horses will never show you their ugly side.

He role modeled.  This is the best part of all.  He sent his analysis to the members of his team.  He used his setback to help his teammates learn.  Instead of trying to look like a guru, he showed them how to handle loss.  That is a lesson far more powerfully delivered than in any textbook or blog post.

I predict this trader will be a rock star.  By turning his loss into learning for all, he showed leadership, not just management.  And, of course, that could never have happened if his firm did not promote team building, learning at the desk, and apprenticeship.

At one hedge fund where I work, portfolio managers are encouraged to build out teams by hiring junior professionals who have particular areas of experience and knowledge.  Those developing managers add value to their teams and learn the skills of trading and portfolio management at the desk.  The hit rate on their success is unusually high.  Why?  Because they learn through apprenticeship, not through a classroom or through unguided experience in front of a screen.

When you have a team and can learn from the successes and failures of others, your learning curve is multiplied.  Whether you work at a trading firm or independently, a key to success is surrounding yourself with others who are capable of turning losses into lessons.  Sharing your experiences with others transforms those lessons into commitments.

Further Reading:  Managing and Leading Your Trading Business