Saturday, March 26, 2016

Learning How We Learn: Maximizing Our Trading Environments

I recently wrote about the importance of sustaining a positive mindset by learning from our setbacks.  Confidence comes, not from doing everything right, but from knowing that you can learn from mistakes and become better over time.

But how do we learn best?  Might it be the case that we struggle as traders because we fail to play to our learning strengths?

Consider the average trading floor at a proprietary trading firm, hedge fund, or bank.  What you'll likely see is rows of traders at stations sitting side by side and surrounded by multiple monitors.  Some monitors track news events, some chart markets, some follow prices of various instruments, some keep on top of email.

Can this truly be the best learning environment for everyone?

For many traders, this environment is toxic.  It trains them to be distracted; it takes away from focused concentration.  It encourages groupthink.  It encourages superficial commentary/conversation and maximizes exposure to data--not necessarily the translation of data into useful information.

Is the learning environment better for the solo trader at home?  More multiple screens and potential data overload, with online chat substituting for the rows of traders.  

When I am following markets, I have the data sent to my spreadsheets.  In spreadsheets I can actively manipulate and analyze the information in ways not possible via charts on the screen.  While engaging in those analyses, I'm not watching multiple screens.  I sit alone in an office and have no screens open for chat.  I've learned that I learn best in an environment that helps me focus--and, most importantly, that helps me sustain access to fresh ideas and intuitions.

Other traders are quite different.  They learn very well through discussion with other traders.  Still others learn by reading research articles and gaining a big picture grasp of the market.  I like to look at high frequency data and shifts in those data to identify emerging patterns in individual markets.  That is very different from the investor who develops a broad thesis and then applies it to different markets.

Research tells us that creativity is a function of two processes:  1) deep analysis of information and 2) synthesis of the information to see new connections and relationships.  The first process requires immersion in data; the second requires stepping back from data for big picture reflection.  

Does your trading environment maximize true, focused immersion in information?  Does it facilitate getting away from the trees in order to see the forest?

You wouldn't live in a home that was cluttered, noisy, and unclean; why accept that as your trading environment?

Further Reading:  Learning From Our Genius--And Our Idiocy