Tuesday, November 24, 2009

Information Processing, Learning Styles, and Trading

One frequent experience I've had as a writer is to begin writing about a topic and then discovering new ideas about the topic that I hadn't intended to include in my article or book. It's as if the writing became a kind of brainstorming, helping me arrive at insights that otherwise would have never emerged in day to day thought.

Similarly, I have seen fresh ideas emerge among traders as a result of discussion. Each trader will bring a novel perspective to the dialogue, sparking a new look at markets. In such cases, the whole ends up becoming larger than the sum of the parts: out of new pieces of information can emerge an entirely new and promising trade idea.

All of us process information in a variety of ways. We learn in different ways (see this post for more details and a link to an online questionnaire; see also this self-assessment post), but often don't make use of our different styles of processing data.

One way around that problem is to make sure you process your trading plans in at least two modalities. For example, you might write down your market ideas and plans, but also talk them aloud. You might plot your buy and sell points on a chart, but also write down your reasoning in a blog.

The idea is that processing your ideas in multiple ways will provide you with multiple perspectives on markets. It is different to see your ideas, think them, and hear them spoken aloud. Many times, what makes sense when we're thinking an idea does not make sense when we flesh it out on paper or share it with someone else.

Creating multiple modes of information processing can provide us with the experience that I've had as a writer: in elaborating our ideas, we can often generate new ones.

And it is much more difficult to act impulsively if we have to not only think through our ideas, but spell them out for others to see or hear.

More on generating novel perspectives in my next post in this series.