Sunday, December 27, 2009

Market Awareness, Self Awareness, and Trading Expertise

A very perceptive reader recently asked a question regarding the post on sustaining self-awareness during trading. If traders are self-aware during trading, how can they also be immersed in market action and maintaining their feel for trading patterns?

Ultimately, there is no contradiction: one can be immersed in, say, a fantastic concert and also aware of one's own pleasure in hearing the music. I can be totally focused on the road when I'm driving and yet be aware of my own comfort level with traffic patterns. Indeed, it wouldn't be wrong to say that my focus on the road is filtered through my driving experience, just as my market focus is filtered through my gut feel for moment to moment market action.

When I'm absorbed in a conversation, I'm aware of bodily and emotional cues that tell me how that conversation is going. That awareness is the result of absorption; it doesn't compete with it. For instance, a person will tell me about their view of the market. I will be focused on what they're saying and how they're saying it. I notice that they are rushed in their speech, that they speak of the market with increased volume, that their tone has an argumentative quality despite the fact that no one is arguing with them, and that their assertions are not accompanied by any underlying reasoning. I am very aware of what the person is saying, aware of how they're saying it (and how I'm responding to the message), and aware of how I want to frame my reply (given the person's defensiveness).

In trading, a large part of expertise is learning to filter market action through our own immediate experience, much as a race car driver or a psychologist might. It is this absorption that allows self-awareness to coexist with market awareness.

Note in the prior post how the wrestling coach taught self-awareness to developing athletes during practice time. At first, young wrestlers are completely wrapped up in their match, just as young drivers are totally consumed with the tasks of pressing pedals, watching out for traffic, and steering the wheel. Early in the developmental process, the coach (or driving instructor) provides the self-awareness piece through real-time commentary. Over time, the coach's voice becomes internalized, coexisting with the focus on the tasks at hand.

This is why much of the best performance coaching occurs in real time or very close to real time. The developing performer's self-awareness begins as the internalization of a coach's voice and actions, just as a child's self-awareness begins as internalized dialogue and experience with parents and other significant figures. That "slow down, slow down" message from the driving instructor becomes the young driver's self-talk early in the learning process; eventually it becomes a routine part of the experienced driver's performance.

When developing traders are coaching themselves, they provide their own commentary through what they mentally rehearse before trading and what they write in journals. Many traders keep these messages as post-it notes attached to trading screens, so that those "slow down, slow down" messages are sustained during periods of market absorption. Over time, the messages are repeated enough times, in enough ways, that they become part of a trader's self-talk and a natural part of performance.

At that point, absorption in markets and self-awareness become one: we experience, not ourselves and markets, but markets through our selves.