Sunday, March 15, 2015

Best Practices in Trading: Priming the Mind for Performance

One of the challenges of preparation is ensuring that what you've drilled when you're in practice mode will actually stick in the mind when you're in the heat of battle.  It is not at all uncommon for students to prepare hard for big tests, only to have the material they studied fly out of their heads during the exam.  What we process in a calm, focused manner and what we can access when we are hypercharged in flight or fight mode can be very different things.  That is why processing information more frequently and deeply (encountering the information in different ways) is essential to cognitive performance.  What we need to know if most likely to stick if we rehearse it well.

Today's best practice comes from reader Daniel Martin Schulz from Hamburg.  He describes a cognitive priming strategy that he has found effective in his trading preparation:

"Thinking back to high school and university times, one technique that often provided me with a welcome boost before important tests the next morning was to review particularly important material right before going to sleep (and I mean right before the head hits the pillow, virtually the last thing before sleeping, except maybe kissing your significant other good night). It continues to amaze me how the material thus reviewed “sticks”. It must be something about how our brain consolidates information and learned content during sleep (I am sure others have written about it but I have no link or article ready).

I do not review a huge amount of charts – only a handful of print outs of the markets I followed very closely during the day, that I traded and/or that I intend to trade the next session. I use 4 time frames for each market (daily, hourly, 15 min, 5 min – but these details are unimportant and the time frames will vary from trader to trader). What will not vary is that we can "seed" our unconscious/sleeping brains with something to work with during the night that way. A small advantage for sure – but ours is a business of hunting the ever so slight edge."

Daniel's review strategy is effective because it reduces the impact of interference from the processing of subsequent events.  Research suggests that an important part of creativity is an incubation process in which we relax our focus following intensive immersion in a problem.  Daniel uses sleep as that incubation period, achieving a kind of seeding of the mind.  This might aid both the recall of information studied and the integration of that information into fresh trading ideas.

Further Reading:  Paying the Tuition for Intuition