Monday, October 01, 2018

The Real Way To Learn Trading

In a recent article, I ask the question of whether individual traders can succeed in financial markets and take a look at actual research on the percentage of traders who sustain profitability.  I also examine a number of successful training efforts and what they are doing to increase the odds of trading success.

What emerges from this exploration is an insight:

The real way to learn trading is not so different from the real way to learn to be a doctor:  see one, do one, teach one.  

Medical students begin their clinical education by shadowing experienced doctors and seeing first hand what they do, hearing why they're doing it, and observing how they do it.  Learning first occurs at the bedside or in the examination room.

The next phase of learning for the medical student is doing some of the work with patients themselves, while under close observation and supervision.  This might begin with taking histories and conducting physical exams and progress to assisting in simple procedures, such as removing a skin growth.  All of this learning occurs within a team, with frequent evaluation and feedback to build skills.

The more advanced phase of learning occurs when the medical student becomes a resident physician and participates in the teaching of new students.  We learn by observing and doing, but it is teaching others that cements our knowledge and extends our experience.

As this analogy points out, the real way to learn trading is to not learn solo.  Basketball and football players always learn from coaches and teammates; artists, musicians, and chess masters always train with mentors.  So few succeed in financial markets because:  a) they begin with limited capital and cannot sustain a living from normal, expectable returns; and b) they lack structured learning processes and resources.

The old model of trader education emphasized didactic seminars/webinars; the newer model embraces mentoring and interactive learning in teams at hedge funds and proprietary trading firms and via online communities.  It is in these venues that traders have a real opportunity to see one, do one, teach one.  And it is in these venues that we can see enhanced odds of trading success.