Thursday, January 12, 2017

Supercharging Learning and Your Development as a Trader

In a recent post, Adam Grimes offers a number of helpful thoughts and advice for developing traders.  He makes the very valuable point that many of the psychological challenges of trading resolve themselves once basic, fundamental components of trading are properly addressed.

I'd like to add an observation to Adam's excellent list of must-do's for evolving traders.  The observation was inspired by a group coaching exercise I performed yesterday with the developing traders at SMB.  They came to my session probably expecting me to deliver a talk on a psychology-related topic.  Instead, I began by going around the room asking each attendee to name the one goal they were working on in that day's trading.  To their credit, the traders were able to quickly articulate what they were attempting to accomplish.

My observation is that the rate of development in a trader critically hinges upon:  1) keeping score with one's trading; 2) using score-keeping to identify clear aspects of trading to work on; and 3) the manner in which one actually works on those goals.  This third component turns out to be particularly important.

A good, diligent trader will keep track of P/L of trades, identify good and bad trades, and perhaps write in a journal what they did right and wrong and how they want to improve.  That is great.  Consider, however, the trader that takes the following additional steps:

a)  Discusses good and bad trades with a coach, mentor, or colleague and gathers additional perspectives re: things to work on;

b)  Films the trading session and actively reviews each trading day, focusing on specific areas where decisions were made and could have been made and noting what to look for in the future to take the right actions;

c)  Uses results to improve screening for trade selection, including writing scripts that automate screens and identify stocks trading with similar patterns.

Those additional steps accomplish two things.  First, they allow the trader to process learning lessons more deeply, because those lessons are processed via multiple modalities:  through discussion, active observation, and automated analysis.  When we learn something in multiple ways--think of learning to drive a car by reading and memorizing road signs and rules; practicing on a driving simulator; and going out on the road with a driving instructor--our learning is most likely to stick.

The second benefit of these added steps is that they place the trader in a very active learning mode.  The trader who films the session is then reviewing the film, pausing it at key points, writing down observations, and cementing patterns to be acted upon--no different from athletes who watch game film as preparation for practice and upcoming games.  The active and interactive learning keeps the trader highly engaged and focused and thus more likely to take in the lessons learned.

Learning more deeply in multiple modalities; learning more actively by doing and not just observing--these enrich the development process and accelerate the learning curve.  One or more traders in my meeting engaged in one or more of these best learning practices.  Imagine being in a community of traders, each of whom is learning deeply and actively.  

The process of learning is every bit as important to development as the lessons being learned.

Further Reading:  Learning How We Learn