Friday, April 04, 2014

Deep Learning and Trading Edge

Recent posts have focused on trading "edge", the advantages of successful traders in the marketplace, and what that might mean as a broader approach to life.

Some of these "edge" factors can be found in a post from Charles Kirk, which passes along insights from George Fontanills.  Among the key ingredients of "a winning trader's edge", the list includes:

Humility - Never thinking you're smarter than the market.
Learning Curve - Acquire and test your knowledge to build confidence before taking risk.
Flexibility - Adapt your strategies to market conditions.
Planning - Know what you want to do next to avoid impulsivity in the heat of battle.
Specialize - Develop an area of expertise and master one thing at a time.
Continuous Learning - Never stop growing and innovating

Another post by Kirk highlights a very important part of developing an edge:  knowing your probabilities.  Read the part where Kirk talks about how he tracked the success of technical patterns.  This captures the essence of deliberate practice and the development of elite performance.  There is an important difference between traversing a learning curve and immersing yourself in a deep learning curve.  Learning curves help you become knowledgeable; deep learning curves cultivate expertise.

This is why I like the "anchor trade" concept.  Instead of trying to learn many kinds of trading and developing expertise in none, it makes sense to master one facet of the craft before extending the expertise to related areas.  I strongly suspect that mastery-based learning is more effective in exploiting brain plasticity than more diffuse, generalized learning.  In other words, the right kind of learning process is more likely to rewire us for further learning.  Not all experience brings expertise: deep learning is transformative.

Further Reading:  The Brain's Role in Trading Performance