Three pillars of expertise

The number of traders who seek expert results is
great; the number who are actually pursuing a developmental path toward
expertise is relatively small.

A large body of research across various
performance fields–from athletics to the performing arts–informs us of what it
takes to achieve expert results. Until very recently, however, this research
has gone unnoticed in the trading world. All too often, expertise is promised
as the result of following a particular trading method, guru’s advice, or
self-help strategy. Rather, expertise is the result of several interwoven

1) A developmental process – In every
field that has been researched, sustained levels of expert performance have only
occurred after there has been an ongoing process of skill acquisition. The
well-known “ten year rule” suggests that most expert performers–musicians,
athletes, chess players–require ten years of concentrated practice in order to
master the knowledge and skills in their fields. Interestingly, however, the
developmental process of the expert does not begin with such intensive effort.
It begins with sheer fun and the discovery of a close match between the demands
of a field and one’s own talents, skills, and interests. Finding a performance
niche–one in which performance becomes intrinsically emotionally rewarding–is
necessary to sustain the effort needed for those ten years of learning.

2) Multiplier effects – The expert
performer not only follows a different developmental process from the
non-expert, but also follows a very different trajectory. The budding expert
who finds a niche is often singled out by mentors for enriched learning
experiences, which in turn create enhanced performance, and future
opportunities. Normal learning follows a linear course; learning with
multiplier effects is subject to compounding. Performance is neither all
heredity, nor is it all environment. Instead, superior talents (heredity) help
us select the experiences (environment) that will best maximize our

3) Resilience – The odds that an expert
performer will produce a successful outcome do not improve over the course of
the expert’s career, according to the research of Dean Keith Simonton. An
expert batter is just as likely to strike out during his peak years as during
his earlier career; an expert actress is as likely to produce a flop as a hit
throughout her career. Highly accomplished individuals are distinguished by
their sheer levels of productivity: they produce so many efforts that,
eventually, some of them survive the process of natural selection and are
enshrined as major achievements. A great trader may lose on many trades,
but–with superior capitalization and risk management–stays in the game long
enough to produce the large wins that make for a successful career. This
requires an ability to tolerate losses and disappointment–a resilience that
would lead many others to quit before ever reaching a pinnacle of productivity.

Are you on the path to expertise? A yes/no
answer to each of the following questions might aid your frank self-assessment:

1) Do you have a structured process for
identifying strengths and weaknesses in your trading and using these to
continually improve your future trading performance?

2) Do you spend as much (or more) time working
on your trading performance as you do in actual trading?

3) Does your trading make use of specific
talents (lifelong abilities) and skills (acquired competencies) that have led to
superior achievement in other areas of your life?

Simply writing in a journal or talking with a
coach is no more a performance strategy for a trader than it is for an Olympic
athlete. Yes, journals and coaches can be helpful in generating ideas, but
performance ultimately hinges on the accelerated learning that comes from the
multiplier effects of a concentrated developmental process. Think of a
world-class athlete or concert violinist, and you’ll have a sense for what it
takes to develop expertise in trading–or any field of endeavor.

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 and
a research blog. His
forthcoming book (Fall, 2006), Enhancing Trader Performance, applies
research-based ideas and techniques to the development of traders.