Saturday, January 02, 2016

Teamwork in Trading: Processing More Information, Better

There are two great mistakes traders make in processing information.

The first is to process market-related information in isolation.  If we surround ourselves with smart people, we reap the benefits of parallel processing.  Inevitably some colleagues will see things that we miss or see things that we see, but in unique ways.  Opening ourselves to the ideas of others can help us think more critically about ideas we take for granted.  At times we will lack confidence; at times we will suffer from overconfidence.  In both situations, processing information in parallel with insightful peers can help us find the happy medium.

The second mistake we can make is to substitute the thinking of others for our own.  Instead of first developing our hypotheses and then testing them against the ideas of others, we short-circuit idea generation and jump onboard ideas we hear from others without fully vetting those ideas.  Little wonder that we then lack the true conviction to stick with those ideas when they move against us.  When we substitute the judgement of others for our own, we reinforce a lack of confidence in our own abilities.

Steve Burns recently posted top tweets of the week--itself an interesting social approach to trading--and featured an interesting observation from Assad Tannous.  Assad pointed out that if a trade isn't worth tweeting, it's not worth taking.  In other words, if you care about the people you're addressing, you're not going to spew garbage.  You're going to share ideas you think are genuinely worth sharing.  What Assad is saying is that if an idea is good enough to give to someone you care about, it's good enough to have as a position.

The right teamwork can amplify our individual work.  Several perceptive, creative people operating in parallel can see more of the world--and see the world in more ways--than any of the individuals in isolation.  The right teams, whether in trading or in romantic relationships, make us better.

Further Reading:  Building Your Success Pyramid