Becoming your own trading coach
a recent blog post, I suggested that coaching for traders could be
valuable if properly structured. But is it possible for traders to coach
themselves for success? Can the process of expertise development be
self-generated?
There is actually a fair amount of research on this topic. The general
conclusion of this work, which I review in my upcoming book, is that the
importance of mentoring to performance success is specific to each performance
field. Team sports, for instance, universally rely upon coaching for expertise
development. It is impossible, for instance, for an individual to become
proficient at a game such as ice hockey without having a team to practice
with.
Other sports and performance fields are more entrepreneurial. Chess, jazz
music, and poker are examples of fields where high levels of attainment can be
achieved through individual practice and a minimum of formal instruction.
These are fields in which learners can execute performances on their own,
obtain feedback, and steadily make improvements. Many of the jazz greats, for
example, developed their talent by playing night after night in local clubs.
The research of Benjamin Bloom and his colleagues at the University of Chicago
suggests that the role of mentors varies across the learning curve. Early in
development, a coach teaches basics, as in the case of a Little League coach
or a beginning piano teacher. Later, practice becomes more structured and
extended as part of competence and expertise development. A coach at these
later phases needs to have a solid mastery of the performance activity to
structure practice properly and provide meaningful feedback.
Many of the highly successful traders I’ve known and worked with have acquired
their skills through self-development and a relative minimum of guidance from
senior traders. In these situations, we can break down their learning
activities into four components that I call P3R:
- Prepare
- Plan
- Perform
- Review
Prepare
refers to activities that orient the performer to the upcoming challenge.
Running drills helps prepare a football team for a game; reviewing charts and
market data prepares a trader for the upcoming trading session.
Plan
relies on an assessment of strengths and weaknesses to guide how the
performance will be undertaken. A military leader develops a battle plan out
of intelligence information about the enemy and an evaluation of his own troop
strength and strategic position. A trader’s plan includes the patterns he or
she will trade, the capital to be allocated to trades, allowable risk, etc.
Perform
is the execution of a plan, with mid-course correction as needed. A basketball
team will call time out if the performance is not going according to plan. A
trader may reassess a plan in light of unexpected economic news and a price
breakout.
Review
comes after a performance, as part of assessing what was done right and wrong.
The military leader conducts an after-action review following a mission to
tweak the overall battle plan and correct any weaknesses that might have
emerged. A trader utilizes review to identify flaws in trading plans and the
execution of those plans, using the feedback to begin a new cycle of Prepare.
Notice that, in good mentorship,
Prepare-Plan-Perform-Review is a cycle, not a linear sequence.
The idea is to create learning loops in which you the performer/student can
also be the mentor/teacher. Incorporating structured feedback into future
preparation and planning is key to self-coaching.
Trading journals are a time-honored tool for
self-mentoring, structuring and documenting the P3R process. Increasingly,
we’re seeing online tools for journaling that incorporate graphics and market
data into the trading journal. Platforms such as
CQG mark charts with the points at which you made trades and worked orders
in the book, allowing you to add your own comments. These can be readily
printed out for future reference and review. Programs such as
Trader DNA allow users to print out
charts of trading results and tables of performance, summarizing a variety of
performance metrics that highlight strengths and weaknesses.
I’m increasingly impressed with the
Stock Tickr program, which now has a
Pro version that integrates an
online journal with
charts of one’s trades and statistics about trading results. Users of the
program have the option to keep their journals private or
share with others in the Stock Tickr community. This latter option opens
the door to peer mentorship and coaching.
The most valuable service I can
perform for traders, I believe, is not to become their trading coach, but to
help them mentor themselves. My upcoming
presentation at the Futures Trading Summit
will be largely devoted to this topic, stressing ways that traders can
accelerate their own development. My hope is also that my
morning market updates and
trading Weblog can
also help traders better Prepare, Plan, Perform, and Review their way to
success. A list of additional resources to aid your mentorship is available on
the Trader
Development page of my personal site.
Disclaimer: I do not have a commercial or proprietary relationship with any
of the resources mentioned in this article and on my site.
Brett N. Steenbarger, Ph.D. is Associate Clinical
Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical
University in Syracuse, NY and author of
The Psychology of Trading (Wiley, 2003). As Director of Trader
Development for Kingstree Trading, LLC in Chicago, he has mentored numerous
professional traders and coordinated a training program for traders. An active
trader of the stock indexes, Brett utilizes statistically-based pattern
recognition for intraday trading. Brett does not offer commercial services to
traders, but maintains an archive of articles and a trading blog at
www.brettsteenbarger.com and a
blog of market analytics at
www.traderfeed.blogspot.com. His book, Enhancing Trader Performance,
is due for publication this fall (Wiley).