Saturday, October 24, 2015

Three Best Practices of Best Traders

Here are three best practices that I observe among the best traders I know and work with:

*  Increase your exposure to new and different ideas - The worst traders are caught in confirmation bias: they seek views that bolster their own.  The best traders I know are intellectually curious: they seek out fresh perspectives, and that helps them generate fresh trading ideas.  After all, you can't expand your mind without challenging your mind.  What is your daily and weekly process for mind expansion?  A great way to increase your exposure to new and different ideas is to talk with new and different people and read/listen to different online offerings.  Check out The Enterprising Investor site from CFA and its menu of resources from different authors.  Check out the podcast links, longform links, and research links via Abnormal Returns.  There are a lot of smart people represented on those sites that can help feed your brain.

*  Spend as much time learning from your trading as you actually spend trading - The ratio of practice time to performance time is a great predictor of elite performance, whether among Olympic athletes or chess champions.  If you lose in your trading, was it because of getting ideas wrong or was it because you traded sound ideas poorly?  Either alternative leads to useful corrective action:  looking at new information that can help you get ideas right and developing trading best practices that help you optimally implement your ideas.  Experience itself is not a teacher; we learn only by actively reviewing and reflecting on experience.  If your trading is not teaching you specific lessons that you concretely implement, you are not on a learning curve that can lead to elite performance.  A big part of the Trading Psychology 2.0  book is devoted to learning from winning as well as losing performance: that's what uncovers the best practices that lead to best processes.

*  Manage yourself, not just your risk and your positions - An insightful trader this week took a hard look at his recent trading and came to the conclusion that he was not trading at his best because he was not keeping himself at his best.  What he found is that he performs at his peak when he is emotionally and physically conditioning himself for peak performance.  That's what creates the intensity of focus that picks up the next great idea; it's also what generates the energy needed to stay resilient in a drawdown.  Do you have a game plan each day and week for making the most of your energy level, your relationships, and your state of mind and body?  The work we do on ourselves is work that helps us become better performers; very often our trading slides when our self management slides.

Notice how those three best practices combine to create a comprehensive training program.  It's when we intensively train for success that we create the life mirrors that help us internalize confidence and resilience.  

Further Reading:  Training For Success