Wednesday, July 30, 2014

The Essence of a Trading Process

At the broadest level, trading consists of analyzing, synthesizing, and doing.

Analyzing is extracting information from markets, immersing ourselves in data.  It is our look through the microscope.

Synthesizing is assembling those data into a coherent picture, extracting pattern and meaning from the reams of market information.  It is our telescopic view.

Doing is taking action on the meaning we have extracted from studying markets.  It includes everything from determining the best expression of a view to managing risk and reward once the view has become a position.

In trading, the microscope and telescope of viewing are transformed into real world doing.

At the end of a trading day, week, or month, we repeat the process--only we turn the lens inward.

We analyze our performance, immersing ourselves in the data that tell us how well we executed and managed our trades; how well we discerned genuine opportunity in markets.

We synthesize our performance observations into goals that move us forward, capturing what we've done well and what we need to improve.

Then we return to doing, feeding those goals forward into future market analysis, synthesis, and doing.

Deliberate practice is a cycle of stepping back to observe and stepping forward to act.  It's also a cycle in which we first act in the world and then act upon our performance.  

Analyzing, synthesizing, and doing, in markets and with ourselves:  that is what a trading process is all about.

Further Reading:  Trading as a Performance Activity