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A brokerage firm exec recently talked with me about the educational needs of new traders. What do new traders need to succeed? How can we improve upon the ratio of traders who succeed to those who blow out of their accounts within months?
When I wrote my recent book on trader performance, I researched various performance fields - including athletics, performing arts, and games of skill - to see how expert performers developed their skills. Based upon that research, here are three core activities that I believe should be part of every new trader's education:
- Simulation - A large body of research suggests that people learn complex patterns through intensive, repetitive exposure to those patterns. By watching markets in simulation mode - something available in such trading platforms as NeoTicker and Ninja Trader - traders can experience far more patterns than if they simply watch live action. The ability to replay live markets again and again accelerates the learning curve by enabling traders to internalize variations on patterns and common expectations following these.
- Metrics - Intensive practice and rapid, accurate feedback about the strengths and weaknesses of each practice activity seems to lie at the root of most skill development. By collecting data on our trading - metrics such as how much we make/lose, how much we draw down, how long we hold onto winning and losing trades, etc. - we obtain the feedback that enables us to learn from success and failure. Those metrics also provide goals for future practice and development. The above platforms provide basic metrics; more detailed reports are available through the Trader DNA software.
- Journaling - If simulation and metrics provide the raw data for our learning markets, journaling provides the overall learning plan. By keeping a regular trading journal, we can track our progress, set continuous goals, and build on our strengths. The journal pulls together the information from simulated trading and performance stats to create a learning plan. Note that online journals are becoming increasingly popular; a nice offering comes from Stock Tickr, which allows traders to selectively share journals with other traders for mutual mentoring.
What kind of patterns in the market should traders be looking for and learning? I recently have been conducting free sessions on my blog in which I track the market in real time for traders, highlighting important patterns that reflect supply and demand in the stock indices. My next session is scheduled for Tuesday AM, October 31st. There is no charge or registration and you can rest assured that I won't try to sell you any products or services, because I'm not in that business. The goal is simply to enable traders to read volume flows in the markets, understand *who* is dominating market action, and develop trade ideas based upon how the largest market participants are behaving.
Trading, ultimately, is a performance sport. My hope is that a structured program of practice, feedback, and reflection can help you become as good a performer as your talents and skills will permit. The blog sessions might be a way to get started by focusing on specific patterns you can track in your practice sessions.
Disclaimer: I am not commercially affiliated with any of the products or services mentioned in my articles; nor have firms solicited the mentioning of these products and services or compensated me for such mention.
Brett N. Steenbarger, Ph.D.
www.brettsteenbarger.com |
