Sunday, March 19, 2017

Seven Training Resources For Developing Traders

If you look at successful programs of training, you'll see three elements:

1)  Hearing - Having information taught to you;
2)  Seeing - Seeing skills being performed based on the information being applied;
3)  Doing - Trying out the skills yourself, with ongoing feedback and guidance from a mentor

Think about apprenticeship programs in the trades; the training of military recruits; the medical education of physicians; and the training of elite athletes.  All involve acquisition of knowledge/information; observation of advanced practitioners applying the knowledge; and supervised efforts to apply the knowledge oneself.  In this three-fold process, we make the transition from theory to skill development.

What we're seeing is an increasing number of offerings to developing traders that integrate the hearing, seeing, and doing through a combination of videos, live trading sessions, and active mentoring/teaching.  Back in the day, trader education generally meant someone giving a class on a topic--and that was it!  Obviously that didn't help traders translate theory into practice.

Here are some outlets for more complete training and support of developing traders that I'll list in alphabetical order.  My goal is not to formally review or endorse these, and none knows that I'm writing this article.  Rather, the idea is to point developing traders in a few directions that could prove promising.  If I have missed some excellent comprehensive resources, please feel free to let me know at steenbab at aol dot com.

Crosshairs Trader - David Blair has assembled a comprehensive suite of educational videos and daily watchlists, reviews, and mentoring to help traders apply chart-based setups in real time.  Great way to see how an experienced trader approaches market opportunity.

Exceptional Trader - Terry Liberman has assembled a unique coaching resource for traders.  The focus is not on finding trade setups, but rather on building your trading business and figuring out what *your* edge is in markets.  Regular webinars and group as well as individual coaching.  Great way to think through the big picture of your trading.

Futures.io - Mike has built a large and active trader community with chat and frequent webinars and downloadable trading tools and resources.  Topics on the discussion threads range from trading journals to the creation of quant tools for trading.  Great way to learn from others.

Investors Underground - Nate and team have assembled an active trading community that offers beginning and advanced courses, chat rooms for different strategies, daily watchlists, webinars, and mentoring.  The courses cover a range of topics from chart patterns and setups to scanning for opportunity and reading Level 2 information.  Great way to connect with a variety of mentors and traders in a community.  

NewTraderU - Steve Burns explicitly addresses the learning process of new traders with courses on such topics as using moving averages in trading and trading with options.  He also maintains an active blog and has written several ebooks.  Great introduction to trading.

OpenTrader - Ziad and Awais offer a comprehensive training program that includes a large number of videos, exercises to drill skills, and live mentoring/coaching.  A unique aspect is the grounding in auction theory and Market Profile.  Great way to approach trading with a well constructed curriculum that moves from theory to practice.

SMB-U - Mike and Steve have built SMB's training programs into a successful proprietary trading firm.  Detailed courses integrate video, skill drills, and a real time audio feed to their trading desk.  Topics range from foundation skills to tape reading and options trading.  Their in-house training includes practice trading on a simulator, access to quant tools to improve trading, and daily mentoring.  Great way to learn hands-on.

Interested traders will want to investigate offerings and the cost of those offerings thoroughly before seeking training.  Note that most of these services are offered for active/day traders and especially those in the stock market.  If you do investigate, I think you'll be surprised by the depth of offerings and the degree to which information is supplemented with active opportunities to watch experienced traders in action and try out their methods for yourself.

For those looking for a low overhead start with trading education, check out Adam Grimes' site, which contains a podcast covering relevant trading topics and a free trading course that tackles topics ranging from technical analysis and psychology to quant trading and options. 

Further Reading:  Fake and Real Education in Trading 

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Note:  TraderFeed will move to a weekend basis of publication starting this coming week, but I will repost popular pieces during the week re: topics that seem currently relevant.

Saturday, March 18, 2017

Building Your Trading By Building Your Consistency

Bella makes an excellent point in his recent post:  We improve our trading not only by making improvements during trading hours, but also by building consistency in our lives outside of trading.  It is through such consistency that we build habit patterns.  Those habits reinforce qualities in us that show up in our work.

Just a moment ago, I was starting to write this post when Sofie jumped onto my lap after bringing me her favorite toy, a rubber mouse.  She was purring and clearly wanted to cuddle and play fetch.  So now I have a dilemma:  do I continue with the post or do I pet this formerly homeless cat and toss her mouse for a few rounds of fetch?  Of course it's a no-brainer.  I play with Sofie.  And I would have done the same thing if it had been my little son or daughter coming up to me while I was reading, writing, or working.  People and their needs come first.  That's what makes me a psychologist.  The consistency of acting upon that is a big part of what has helped me be effective when the people I work with have needed attention.

Whatever we do during the non-trading day is training for what we will be like when we're trading.  Everything we do trains us for something.  If we are scattered and disorganized in our personal lives, we are building those qualities and will enact them in our trading.  If we fail to make efforts outside of trading, it won't be surprising if we don't follow through on goals written in our journals.  Bella's point is that we become better traders by enacting the qualities in our personal lives that will make us better in financial markets.  

In small ways, every day, we can be the person we want to become until, one day, it all comes naturally.

Further Reading:  Be The Person You Want To Become
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Friday, March 17, 2017

Trading With a Higher Consciousness

A higher dimension of consciousness occurs when we are self-aware:  when we not only act, but observe ourselves in the process of action.  Some activities are best performed on a routine, automated basis, such as driving a car through familiar territory.  To be continually thinking about how you are driving would interfere with the driving itself.  That is the basis for most performance anxiety.

Other activities are not routine and involve deliberate choice among difficult alternatives.  Driving on very icy roads with very limited visibility is not a routine activity and proceeding on an automated basis could be fatal.  In difficult terrain, you have to think carefully about how you're negotiating each turn, how fast you can afford to go, etc.  That self-awareness helps you govern your actions, and it ultimately helps you address the larger question of whether you *should* continue driving under those conditions.

Active trading is challenging from a consciousness perspective.  On one hand, there are times when the trader needs to be absorbed in market activity, reading patterns as they unfold.  This requires the ability to operate on a routine, automated basis.  Active self-awareness can impair such real time pattern recognition.  On the other hand, self-awareness is required for proper risk management and for those occasions when the trading path becomes icy, with limited visibility.  It is self-awareness that tells us we need to pull back from trading and reassess markets.  We cannot pull back when we're on auto-pilot.

Balancing market awareness and absorption with self-awareness and self-observation is one of the trickiest skills traders need to master.  It requires a flexibility of focus, an ability to shift cognitive gears when self-control becomes vital.  One way I've developed this gear shifting is to use losing trades and days as an automatic signal for stepping back and becoming more self-aware.  The losing trades and days may be a sign that markets are changing; they also may signal that we're reading the market improperly.  Losing trades are like seeing some ice on the road and fog in the air...we use the change in conditions to become more aware of how we're driving.

Practicing that gear-shifting--from market focus to self-focus and back again--is a great way to develop a higher consciousness in our trading.  Every step back from the screens can become an opportunity to rehearse gear shifting and build our capacity for flexible performance.

Further Reading:  Sustaining the Flow State
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Thursday, March 16, 2017

Techniques for Changing Your Trading Psychology

I look forward to the Futures.io webinar a week from today, when I'll describe three research-backed methods for working on the most common trading psychology challenges.  What will make this session unique is the focus on specific techniques that you can take away and use to coach yourself for challenging trading situations.  I'll also be taking questions from participants and illustrating how the techniques can be adapted for different traders and challenges. 

Hope to see you there!

Brett

Wednesday, March 15, 2017

Using Cycles to Trade Market Trends

Even in trending markets, we see cyclical behavior.  In a distinct uptrend, we will make cycle lows at successively higher price levels.  In a downtrend, we make cycle highs at successively lower price levels.  Those cyclical movements can provide worthwhile entry areas for those looking to ride longer-term trends.  In other words, we can participate in a trending market by going with the trend for our trade but entering countertrend with the market cycles.  This is different from momentum trading, where we're looking to buy strength and sell weakness on price breakouts.  In a low volatility environment, using momentum to time entries can lead to getting chopped up.  

The chart above depicts cyclical behavior in SPY (blue line) as a function of a moving average of the percentages of stocks in the index trading above various moving averages (data from Index Indicators).  You can see we're in oversold territory on the measure at a higher price low.  This leads me to expect at least a retest of recent highs in the market's bigger picture.  Very good short-term trades can be found when intraday flows line up with this larger market picture.

This is yet another way that we can integrate quantitative and discretionary information in our trading.

Further Reading:   Trading Market Cycles
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Tuesday, March 14, 2017

Lessons From A Successful Independent Trader

Here's a great post from Bella regarding a small independent trader, J. Park, who has grown his account to $100,000--and what that trader did to achieve his success.  Several lessons jump out from his experience:

1)  He failed many times small before finding success - We see this pattern among a surprising number of the Market Wizards that Jack Schwager interviewed.  It took experiences with failure to finally figure out what produced success.  The success came from perseverance and the ability to learn from failures.

2)  He found multiple mentors - I believe this is key.  Whether its chess, athletics, performing arts, or elite military, we find that successful performers are mentored and trained.  The presence of multiple mentors permits an integration of perspectives that eventually leads one to their own distinct approach.  Interestingly, I have known the mentors mentioned by J. Park, such as @InvestorsLive, @Modern_Rock, @kroyrunner, and @MikeBellafiore, to have mentored other successful traders.  Think of all the stars that have come from basketball coaches John Wooden and Coach K:  good mentors produce good performers.

3)  He focused on process - As he points out, we can't control P/L; we can control our trading process:  what we trade and how we trade it.  The successful trader may be discretionary in their decision making, but will not be random.  Successful trading is rule-governed, where the rules are derived from a clear understanding of who is in the market and what they're doing.

There is a fourth ingredient in success, and it helps explain why many successful money managers started out as active, short-term traders.  Short-term trading creates multiple learning trials.  If you are investing and holding positions for six months to a year or more, how many learning trials do you obtain over the course of a career?  The daytrader has 200+ learning trials every year--more if they are using simulation tools, engaging in review of recordings of their trades, etc.  That intensity of learning trials acts as a kind of cognitive gym, building the decision making and pattern recognition skills of the trader.   

All the learning trials in the world, however, will not lead to a cumulative result if they are pursued haphazardly.  The reason we see mentoring as a key ingredient in success across disciplines is that the right teaching guides learning trials toward optimal development.  Great athletes don't just exercise daily; they perform the right exercises.  That is equally true for developing traders.

Further Reading:  Trading With Focus
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Monday, March 13, 2017

Growing Your Trading By Integrating Quantitative and Discretionary Processes

A developing trader makes progress by mimicking a mentor, an experienced and successful trader.  That developing trader becomes an experienced and successful trader by finding multiple mentors and integrating the wisdom and best practices of each.  If you look at training programs from medicine to the military, you'll find strong mentors and multiple mentors.  We acquire skills and we integrate them: that generates expertise. 

A distinct trend in recent years is using multiple mentors to integrate quantitative approaches to trading with discretionary ones.  A simple example occurred at a firm where I worked, where several of us developed a predictive model for trend days in the stock market.  We examined days that qualified as trend days and days that did not and built a simple model based upon such variables as volume and breadth.  The output from that model was then shared with traders, who integrated the results into their own trading.  So, for example, a trader might focus on stocks most likely to benefit from the trend by looking at volatility, relative strength, etc.  A different trader might use the model output to extend the holding time on a trade that had already hit its first target.

Yet another example of integration would be using historical studies of market tendencies to frame trade ideas.  Some of those studies can be found via Quantifiable Edges and from Paststat and from InvesiQuant.  Still more quant resources can be found via the excellent Quantocracy resource.  Market regimes can change and what happened in history may not be mirrored in the near future, but knowing tendencies from well-constructed studies can tell you what markets *usually* do in a given set of circumstances.  Some of the best discretionary trading comes from occasions when markets fail to do what they "should" be doing, as that tells us that idiosyncratic factors and flows are dominating trade.  

The ability to integrate new information and styles into our trading is what keeps us learning, developing, and adapting to changing markets.  It's when we don't integrate that we stagnate.  The most consistent finding I've made as a trading coach is that the best traders find multiple ways to win.  Those traders can be successful in multiple market regimes.

Further Reading:  Identifying Trend Days in the Market
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Sunday, March 12, 2017

Three Tools to Improve Our Trading Performance

If we internalize everything that we do such that all that we do acts as training, then it makes sense for us to train as intelligently and purposefully as possible.  Here are three tools for training traders that have the potential to shape our future performance.  (Please note that I have not received any incentives or compensation for mentioning these.  The companies have no clue I'm writing this, which is how I like to keep it).

1)  TradingSim - I've long advocated the use of simulated trading as a way of practicing pattern recognition for active traders.  What makes TradingSim unusual is that it is entirely web-based (no software to download) and the data are included in the subscription.  You can simulate trading any day over the past two years and the simulator will replay that day with any symbols and technical indicators you choose.  You can view multiple charts simultaneously, and you can speed up the replay or advance bar by bar.  You place your trades on screen and the program tracks your P/L and historical performance.  Great way to review the day; great way to practice trading for developing traders--or for experienced traders testing new strategies.  One unusual feature for daytraders is that the biggest moving stocks are displayed, so that you can trade what is moving.  Longer time frame traders can use the simulation to aid their entry and exit execution.

2)  Headspace - Some smart traders I'm working with are using this program and app, which teach meditation and mindfulness.  There is research supporting its use, and a blog addressing various topics related to work on mindfulness.  The platform is web-based and easy to use, with a guide that walks you through meditation exercises, some of which are tailored to particular needs including relationships, performance, and health.  There is a basic foundation sequence for new meditators and also longer, more detailed exercises to build mindfulness for more experienced users.  The app keeps track of your progress and structures your learning, so that Headspace truly becomes a workout routine.  The program will even send calendar reminders to ensure that working on your head is built into your day.  It's a great way to stay actively engaged in meditation work without having to join a class.

3)  BrainHQ - This is quite an unusual program and app that trains specific brain functions, such as memory, attention, and visual tracking.  It's backed by considerable science, and all the exercises are web based so that they can be accessed from any place, any time.  The exercises can be tailored to various levels of difficulty.  The program keeps score and enables you to track your progress.  It calculates your skill level and sets parameters that ensure that you're always challenging yourself at your threshold.  I am not at all proficient at hand-eye coordination tasks, so these are unusually challenging--and frustrating!--for me.  One of the side benefits is that the work on the tasks builds not only attention/focus but frustration tolerance.  If you're interested in cognitive exercise, it puts you through your paces!

What we're seeing is the next generation of tools to build successful traders.  It's one thing to write in a journal and talk with a mentor/coach about trading mindfully or sticking to your best trading rules.  It's another thing to actually work each day on mindfulness and actively practice trading with those rules.  Taken together, these kinds of tools form a kind of performance gym.  Talking to your basketball or football coach doesn't substitute for getting in the gym and engaging in the drills that lead to better conditioning and sharper skills.  Similarly, speaking with a mentor or trading coach can't substitute for hands-on skills building.  These are great ways to build trading-relevant skills without putting your capital at risk.

Further Reading:  Using Metrics to Boost Trading Performance
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Saturday, March 11, 2017

Two Big Ideas That Shape Our Development As Traders

Suppose we start our thinking about performance with two big ideas:

1)  Everything we do is training - We are always reinforcing something.  When we avoid effort, we reinforce avoidance.  When we work out, we reinforce strength and conditioning.  When we talk to ourselves negatively, we reinforce a negative self-image and negative behaviors.  When we establish and follow rules, we reinforce self-discipline.  We're always training; it's just that some people train more consciously, intentionally, and purposefully than others.

2)  We use it or we lose it - What we don't actively exercise, atrophies.  If we don't exercise our bodies, we lose muscle tone and muscle mass.  If we don't exercise our minds, we lose creativity and we decline in our cognitive functioning.  If we don't work on self-improvement and the development of our relationships, we remain stagnant--or worse.  What we don't do during our days and weeks is what we will find it more difficult to do in the future.

So now, with those two premises, we can take a hard look at our lifestyle and ask ourselves what we are training and gaining and what we aren't using and losing.  

Today's lifestyle shapes our tomorrow.

There are many synergies that can be found in our lifestyle.  Physical exercise promotes our health and also our cognitive functioningIntegrating mental and physical exercise, as in engaging in active dance routines, can improve mental and physical functioning better than simply conducting workout routines or mental exercises.  As Alvaro Fernandez notes on the SharpBrains site, our daily activities, including how we eat and what we do for recreation, impact our brain development.  That is important because our number one tool as traders is our brains, our cognitive functioning.  We are either sharpening that tool or allowing it to dull.

So take a look at what you do during the day, during the week.  Is your lifestyle the lifestyle of a peak performer?  We're always training for something: how we live today is what we'll be like tomorrow.

Further Reading:  Human Performance as a Lifestyle
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Friday, March 10, 2017

Exercising Our Brains for Trading Success

I'm increasingly convinced that cognitive factors, and not just personality ones, differentiate the best traders from the rest.  It's not surprising that my recent post on a cognitive view of trading psychology has been the most widely read TraderFeed post in many months.  Trading psychology has long focused on emotions as the most important focus in trading performance.  The cognitive view says that it is how we process information that enables us to see patterns, understand relationships, and quickly act upon them.  Personality and emotional factors can certainly impact our information processing, but all the self-help techniques in the world won't help us if we're not wired for the kinds of trading we undertake.

Can we train the brain for trading success?  In other words, is it possible to systematically exercise and build those functions that enable us to perceive signals in noisy environments?

I believe the answer is yes, and I will go one step further by proposing that an important element that differentiates successful traders from less successful ones is the quality of their screen time when they are following markets.  The successful traders actively exercise the cognitive functions relevant to their trading while they are preparing for the day, while they are tracking markets, and while they are trading.  Their routines act as a kind of mind gym, building such functions as the capacity for focus, speed of pattern recognition, and the ability to translate perception into action.  The successful trader's daily routine is an excellent cognitive workout.

The less successful trader might look at the very same markets and patterns, but gets a shitty workout.  Their focus is often divided among online chatting, watching markets, taking breaks, speaking with traders, and reviewing their P/L.  They never engage in any single cognitive activity for long enough--or with enough intensity--to get a proper workout.  As a result, the less successful trader does not develop cognitively in the way that the successful trader does.  The successful trader becomes a better information processor simply because they are spending more time--and especially more quality time--in the activities that build perception, concentration, and decision-making.

I'm currently evaluating a brain exercise system called brainHQ, which has been supported by a range of published research.  That research suggests that regular exercise of brain functions can improve our processing speed, memory, attention span, and more.  I find it quite possible that programs for training traders will increasingly turn to brain fitness tools as a way of helping developing traders become more cognitively fit for trading.  How many aspiring athletes would star on the field if they never utilized tools to develop their strength and aerobic conditioning?  How many traders can we expect to find success if they're not actively exercising their brains for the right kind of decision-making?

Further Reading:  Training Our Brains For Trading Success
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