Mentoring: The Key to Developing as a Trader

 

11/24/24:  When I first learned trading, the single most effective learning strategy I found was printing out charts of the market I was trading (S&P futures) on different time frames, charts of other stock indexes on those time frames, and a core set of indicators (RSI, NYSE TICK, VWAP lines, etc) on those time frames.  Every day, I identified the "trade of the day" and studied how it set up on the different time frames and how it set up on the various indicators.  I also studied how to best enter the trade, where to set a stop, when/where to take profits/add to the position, etc.  I literally did this for the better part of a year before going live with meaningful size.  By that time, the patterns were ingrained in my mind and a natural part of how I viewed the market.  I didn't fully appreciate it at the time, but I was also training myself to maintain an opportunity mindset and a positive psychology.  We can train ourselves to think big.    

11/21/24:  Here are two keys to successfully mentoring ourselves:

1) Process market activity and trading ideas in multiple ways in great detail:  talk them aloud, write them down, chart them, discuss them with others and listen to their reactions.  What we process many times in many ways, we are much more likely to internalize.  We mentor ourselves by guiding our own processes of preview, performance, and review.

2) Put energy and enthusiasm into the learning process: highlight the details that point to opportunity, focus on identifying and learning from what we've done well, treat mistakes as fuel for growth and learning.  The most positive development occurs in a positive mindset.

===    

I'm in the process of finishing my next book, tentatively titled Positive Trading Psychology.  The last chapter has been the most fun to write, because I've learned the most in writing it.  Nine mentors who work at SMB Capital submitted their best mentoring practices to be included in the text.  Even though I've worked with all of these mentors/traders personally, I found their ideas to be eye-opening.  Here are a few important lessons for developing traders that will be covered in detail in the book:

1) Seek Training, Not Just Education - Education is necessary for professional development and elite performance, but it is not sufficient.  Medical students begin their studies in the classroom, learning anatomy, physiology, etc, but they learn the practice of medicine by observing and helping senior students, interns, residents, and attending physicians.  Coursework and webinars cannot substitute for real-time experience under the guidance of a mentor.  The mantra in medical education is "see one, do one, teach one".  We develop expertise by observing masters at work, by tackling performance under supervision and guidance, and finally by cementing our skills by teaching others.

2)  Learn From Multiple Mentors - We begin by copying a master; we develop our own styles by absorbing the skills of multiple masters.  Copying the master brings us to a level of competence.  Synthesizing the learning from multiple mentors develops our own styles and brings us to a level of mastery.  Teaching others cements our learning and transforms mastery into expertise.  Too often, traders seek answers in a single video, podcast, or course.  Expertise comes from finding and cementing our answers, not by mimicking others.  There are no short cuts in the development of elite performance.

3)  The Best Learning Instills Optimal Trading Psychology - A mentor is not just someone who teaches you where to buy and sell.  An effective mentor models how to think about and pursue opportunity: how to blend risk prudence and reward maximization.  In teaching trading process, mentors inevitably model trading mindset.  We most effectively learn trading psychology in our pursuit of sound trading.  Great mentoring builds a positive trading psychology, as it establishes a sense of understanding and mastery.  We internalize optimal trading psychology when we ground ourselves in optimal trading process.

Most of all, the SMB mentors have taught me that the best teachers are always learning from their students.  The effective mentor-student relationship creates teamwork.  Mentors learn from the research and practice of their students just as the students learn from the instruction and guidance of mentors.  Great mentoring forms great teamwork, making everyone better--

Further Reading:

Three Questions to Ask About Any Market

.      

Becoming Solution-Focused in Our Trading

 

Added Note:  11/18/24:  Quite a few of the senior traders/mentors at SMB Capital are contributing best practices to my upcoming book.  What has become clear is that they don't just teach setups and risk management; they actually do those things with the developing traders on the trading floor.  One mentor described forming joint accounts with the developing traders, so that learning occurs in real time, with real money on the line for both teacher and student.  Notice how this is powerfully different from simply teaching trading techniques in live or online classes.  We learn trading solutions by seeing them applied--again and again--in real time with immediate feedback.  How we learn trading shapes our trading psychology.  

Additional Note:  11/13/24:  We can't be solution-focused in our trading if we're living our lives in problem-focused mode.  A solution-focused life means that we identify--every single day--what specific things we're doing to bring us energy, fulfillment, and success.  Working on our trading is fruitless if we're not working on ourselves.  Here's an article with links to assess our overall well-being and improve our positive psychology.  The goal is to maximize our happiness, life satisfaction, energy, and relationships.  If we are living full and fulfilling lives, we can readily handle the ups and downs of markets and trading performance.

===    

We give energy to what we focus on.

If we focus on negative outcomes, we energize our worries and fears.

If we focus on problems, we fuel our sense of being broken.

What is in your trading journal?  What is in your thoughts after a losing trade?

That is what you are energizing.

This is why it is so very important to focus on your best trading and learn from your successes.

When your trading problems are *not* occurring, that is often when you are doing something right.

Once you focus on what you're doing right, you become solution-focused.

Success follows when we identify our solutions and turn them into habits.

Suppose you identified one thing each day that you did well in your trading and made it a goal to repeat and extend the next day?

What we focus on each day compounds and becomes our reality.

No solution-focused trader has ever gone on tilt.

When we are solution-focused, we grow the best within us.

Further Reading:

Solution-Focused Trading

Keys to Solution-Focused Trading

.

Trading Without Drama

 

Added comment (11/7/24):  In a video just posted, Jeff Holden and I teach a class for the SMB Training Program and address how to avoid trading on tilt.  Tilt always has a trigger.  If we rehearse trigger situations while placing ourselves in states of optimal focus, we defuse our negative triggers.  If we rehearse our A+ setups while placing ourselves in states of optimal focus, we create positive triggers.    

Additional note below:

What if we're looking for the wrong thing in our trading?

What if we're looking for "catalysts" and "breakouts" and bursts of volume and volatility, because that's where the action can be found?

What if, instead, we filtered our search for instruments that were trading in the most stable manner, following relatively unchanging trends and cycles?  

In that case, we would trade, not what moves the most, but what moves the most coherently and consistently.  We wouldn't be predicting in the face of uncertainty; we would be identifying in the face of stability.

If we trade the opportunities that are most predictable with the least drama, how might that impact our trading psychology?

Might our trade selection shape our trading psychology?

Perhaps logic starts where drama ends--

.

Additional note - 11/5/24:  Notice something subtle.  Many traders attempt to use technical analysis tool for predictive purposes.  If we're trying to identify markets that are trading in regular, stable patterns, then the tools of technical analysis can be used to describe those patterns and help us align with those.  To the degree that the patterns indeed remain stable, that would bring some predictive benefit.  The main purpose of the technical tools, however, would be for trade idea generation, capturing the degree to which recent price action has followed stable cycles and trends (and, of course, cycles within trends).  

When I create charts where the bars are defined by volume traded, not time, this helps normalize the market's time series and makes it easier to use technical tools to identify stable patterns.  (Here's an interesting example from a few years ago; here's a relevant earlier post).  It's particularly enlightening when we can identify stable patterns over multiple time frames, aligning our ideas, an idea that Brian Shannon has emphasized in his work.

Further Reading:

A Framework for Trading and Trading Psychology

.