Deep Posts Trading Tips

The better you are, the better you want to be

Lindsey Buckingham “If you’re any good at all, you know you can be better” – Lindsey Buckingham

That’s from a clip on VH-1 Classic during part of a special on the Fleetwood Mac album Rumors. As soon as I heard that statement, I wrote it down because it’s one of the most simple, yet insightful statements I have ever heard. It cuts directly to the core of the quest for mastery – in all things.

I’ve been around the block more than a few times, involved in a lot of different developmental efforts in my life. In all of the ones that mattered to me, all the ones that were to eventually lead to the pursuit of above average performance – and I’m very competitive, so that counts a lot of things – there has always come a time when I’ve reached a point in my education where I realized how little I really knew. Sometimes it was early on. Other times it was after a bit of a slap in the face.

As a volleyball coach, I saw the kind of transformation that kind of change in outlook can have on a player. I’ll use the example of one of the seniors I just got finished coaching. She came to school as a student-athlete who was more interested in enjoying the experience than in growing as a volleyball player. This is sometimes the case with freshmen as they make the shift from high school and club ball to the significantly more intense collegiate environment. This particular player was a bit more”relaxed” then most, though.

That changed during the spring of that year, and I credit her coaching a 14-and-under team in helping that process along. She came back for her sophomore year a much more focused athlete, eager to be a better player and with a grasp of what she needed to do to make that happen. Over the next three seasons she continued progressing along those lines. She knew the level to which her skills had developed, and thus where she had to focus to improve.

In this case, the experience of teaching younger players the game of volleyball and helping them develop their skills helped flip the switch to awareness. In other cases I have seen the shift take place through watching other better, more experienced players. I have always been a big proponent of both things for just that reason. I know for sure they both helped me.

The same certainly applies to trading. Brett Steenbarger talks at great length in Enhancing Trader Performance about how mastery in trading implies not just knowledge, experience and understanding, but also the desire and commitment to continue improving. Sometimes we can create the situation through which that shift in mindset occurs (like teaching/coaching or observing strong performers), while sometimes it happens without a specfic catalyst.

Like most people, I jumped in to trading with two feet and not a heck of a lot of education on the subject. Sure, I understood the markets from a functional perspective. To a certain extent I do believe I also had something of a natural feel for them as well, which is probably part of why I’m still in the game all these years later. In terms of understanding risk management and how to develop a proper trading approach, though, I was pretty clueless. I didn’t know what I didn’t know and I hadn’t yet looked to others to guage where I should aspire to go.

It took reading How to Make Money in Stocks to set me in the right path. Looking back, I’m sure I was attracted by the title, but that worked out pretty well. That set me on the right course, and I became a voraious reader of trading books, learning everything I could along the way and applying it where possible.

Those were the days of trying to learn how to trade, meaning ways of getting in and out of trades. It would be a few more years before the importance of the whole mental side of trading became apparent, at which point I had a second moment of outlook shift. These days I spend very little time reading about the latest technical indicator or trading system. I’ve got a set of techniques that work for me and I focus on applying them, making adjustments along the way as the markets dictate. I’m also a research geek, so I do spend a fair amount of time looking for patterns in the market that I can exploit.

In making a move to trading education, though, I get to keep on showing myself where I have room for improvement. Writing The Essentials of Trading, and now developing and presenting my trading course has forced me to think long and hard about what it takes to trade successfully at the most basic level. It is a constant reminder to myself of what I need to be doing to ensure that my own trading is properly grounded.

In the new year I plan on pushing even further in to trading education. In the process of sharing what I know, I’m sure I will yet again be forced to realize all that I don’t yet know and all the ways I can still get better. If the past has been any indication, it will prove a great growth experience!

I hope you’ll be joining me.

Trader Resources

Do you really need live data and charting?

One of the questions that often comes up with new traders is what kind of data feed they need to trade. The answer, of course, is “it depends.”

Obviously, someone who is going to trade on a very short-term basis (scalping and maybe day trading), needs access to real-time data. Immediate decisions have to be made based on the information, so it’s important to have direct access to prices as they happen.

For a longer-term trader, though, I would challenge the need to have a data feed at all. It is entirely possible to trade successfully as a swing or position trader without benefit of a live feed. I speak from personal experience here.

FutureSource.comThere was a time before I had access to real-time price data that I traded the futures market very profitably just using the delayed charts available for free at FutureSource. I was swing trading for the most part. My needs for data was just the identification of chart support and resistance levels. I could get that just as easily from the delayed charts as I could from the live ones.

Actually, the argument could be made that live charts introduce an unnecessary element in to one’s market analysis. Watching prices move in real-time can have a tendency to lead one toward over-analysis. That’s a very serious risk, and one which can have significant negative consequences on your trading should you fall in to that trap. I will generally look at charts based on end-of-day data just for that reason, as it takes out the intraday noise in prices when I’m looking at more a position-oriented trading strategy than a swing or short-term one.

Regardless, these days one rarely needs to actually pay for price data. Most broker/dealer trading platforms offer more than adequate charting and quote access. That’s fine for the majority of traders. If, however, you want to do backtesting and/or some more advanced analysis, then you may have to invest in a data feed. Keep in mind, though, that there is no need to pay for real-time data, or even delayed intraday prices, if your work only uses end-of-day figures.

Reader Questions Answered Trading Tips

Trading Coaching and Mentoring

A question that was posed to me following on my review of Brett Steenbarger’s new book Enhancing Trader Performance involves how one goes about finding a trader coach or mentor. It’s a tricky question.

First, I think we need to define what we mean when we use the terms “coach” and “mentor”. I brought this up directly with Brett recently, as he uses the two terms fairly interchangeably in his book. That comes from his medical background where they are basically the same thing. Coming from a coaching background myself, my view is different, of course.

I define a “coach” as someone who at the core is a teacher and well educated on the subject in question. For example, as a volleyball coach I teach players the ins and outs of the sport and I help them develop their skills. This is done in a great many ways including specific training regimens and video review. Beyond the skill development, though, there is also motivation, strategy development, and things like that.

Now “mentor” in my usage of the term is more like adviser. This is someone who takes a wider view of things. He or she helps guide you through things. They are often someone who has had success, who can provide advice and suggestions and be a sounding board for thoughts and ideas.

Good coaches can certainly be mentors, and often are. Mentors, though, are not as likely to be coaches.

In many arenas it is pretty easy to define a coach. They are folks who go through training programs and work under other coaches as they enter the field.

For example, I started coaching by helping out my own high school coach. Later, I assisted under other experienced coaches and coached my own teams under the supervision of still others. I read tons of books on the topic. I joined the American Volleyball Coaches Association. I went through USA Volleyball’s Coaching Accreditation Program. I’ve gone to seminars and clinics and talked with coaches from all over the country, worked camps, and coached teams of all levels. In other words, I’ve developed my coaching through an educational and experiential process.

Mentors, on the other hand, are more likely to be experienced people in a given field. They can share their war stories and provide advice based on their own person history of having gone through similar things as the mentee – either specifically related to the field in question, or in general terms. Keeping to my volleyball theme, older players on a team can be mentors to younger ones.

As I mentioned before, a good coach is often a mentor as well. For example, in my role as a college coach I not only worked with the players in developing their volleyball acumen, but I could also share with them my own playing experience. Even more, I could advise them on academic, career, and even life issues at times as well.

The whole topic of trader coaching is something Brett and I have discussed at length. In trading there is no real coaching development structure. There are no coach certification processes, and not much in the way of opportunity for a prospective trader coach to apprentice under an experienced one. As a result, it is hard to have a clear way of identifying coaches and knowing what they can offer.

Much of trader coaching as it has been over the years has been more mentoring in the way I’ve defined it. A budding young trader develops a relationship with a successful trader who has a good deal of experience in the markets. That is great, but only to a point. Why? Because mentors do not always make great coaches.

Here is the classic example. In sports one hardly ever sees the real elite athletes have any success in coaching, if they even bother trying it at all. The best coaches and managers often come from the ranks of relatively average players. There are any number of reasons for this. It may be that being less gifted, the average athlete worked harder learning the game and trying to find ways to compensate for short-comings in talent.

It is also sometimes a simple communication issue. We have all had teachers or professors who were absolutely brilliant in their field, but awful in the classroom. They simply could not present the material in a useful, coherent fashion.

The same sort of thing happens in trading. So many novice traders attempt to learn at the feet of superstar traders because they think the fact that someone made 500% in the markets over the last three years means they can teach them how to do it. Frankly, things just don’t work that way.

First of all, being able to teach someone else how to match your trading results requires you to understand exactly how you achieved them in the first place. Many traders simply cannot do that because they don’t really know. They might think they do because they have a system of some kind, but there are often other elements to the process which go unseen. This can be in terms of trading psychology or personality, or it could simply be years of experience.

Even if that successful trader can tell you exactly how he or she does it, there is still the question of being able to teach it effectively. Not everyone has what it takes to teach. It requires understanding how to communicate with the “student” in ways which will allow them to grasp the material. It also requires a great deal of patience, which not everyone has – especially hyperactive traders! 🙂

Oh, and make sure you don’t mistake teaching for coaching. They are not the same.

There are loads of trading courses, seminars, classes, etc. out there. Some of them use “coaching” in their titles or descriptions, but there isn’t any coaching. It’s instruction. They are teaching you something – generally about a particular market, a style of trading, a trading system, etc. That’s not the same as coaching.

Coaching, at least to my mind, is a very personal thing, and more comprehensive. The coach works with the individual in specifically personalized ways to help them develop. Even in a team situation, a good coach spends time with each player observing them and working on their specific strengths and weaknesses.

A good trader coach does the same thing. It isn’t just about presenting some information and that being it. The coach learns about the coachee, understands their strengths and weaknesses, and customizes the training program to their needs. They also help in the implementation in trading terms – similar to game coaching following on from practice coaching.

If you can find that person and get them to coach you, then you’ve got something special.  Keep in mind, though, that coaching is rarely free. After all, a good coach will commit a decent amount of time to the process. Additionally good coaches will only work with people they know they can help, and they will be able to assess that. They won’t just take on anyone.

Also, realize that one coach may not be all you’ll ever need. Just as an athlete will progress from having one coach when they are first learning the game, to a different one at the high school level, to yet another in college, you may find the need to change coaches over time. There is nothing wrong with that. Certain coaches are more suited in specific areas than are others. One coach could serve you very well as you learn to trade at the beginning level, but you may find you need someone else to help you focus more specifically on day trading, for example.

So where do you find these coaches? That’s the ultimate question, isn’t it?

Unfortunately, it’s not an easy thing to answer. Since there is no Association of Trader Coaches, you’re going to have to do the leg work yourself. Clearly you need to go looking where there are traders and do some research.

My advice would be to look for someone with a demonstrated knowledge of trading and the markets – especially in terms of what you would be looking to learn. Then you need to narrow it down to people who can effectively teach the subject. As I mentioned before, knowledge doesn’t necessarily equate to teaching ability.

After that it becomes more personal and individual. You need to be able to communicate well with your coach and he/she with you. That means ideally spending at least some time getting to know them – certainly enough to establish compatibility.

Having a trading coach is most definitely a worthwhile objective. A good one can help you go way beyond where you are likely to be able to go by yourself. Best of luck finding the right one for you.

Trading Book Reviews

Book Review: Enhancing Trader Performance by Brett Steenbarger

It’s been a few weeks now since I first received Brett Steenbarger’s new book [easyazon-link asin=”0470038667″]Enhancing Trader Performance[/easyazon-link]. At that point I was able to go over the first chapter, which was amazing. Until this weekend, though, I didn’t have the opportunity to progress any further. Over the last couple of days I finally gave it the attention it deserved. Now I’m wishing I’d just read it cover to cover when I first got it!

[easyazon-link asin=”0470038667″][/easyazon-link]First, to keep things totally above board, let me state for the record that Brett Steenbarger wrote the forward to my book, [easyazon-link asin=”047179063X”]The Essentials of Trading[/easyazon-link]. He and I became acquainted through my editorial work with Trade2Win. When my book was near completion, I asked Brett to give it a look knowing that he was involved in trader training and development. The foreword followed from that.

Brett’s new book, [easyazon-link asin=”0470038667″]Enhancing Trader Performance[/easyazon-link], is his second, following on the heels of his extremely successful and worthwhile initial release, [easyazon-link asin=”0471267619″]The Psychology of Trading[/easyazon-link]. I would not, though, call it a sequel. While the latter part of the new work does bring in major elements of what the first book covered, the majority of it has a quite different focus

Enhancing Trader Performance is primarily about developing trading expertise. As someone who has spent his fair share of time teaching and coaching on a variety of levels and in different theaters of pursuit, some of which were extremely competitive and performance oriented, I was immediately grabbed by Brett’s presentation. And it never let me go – literally pages of notes later.

This book may not be for everyone. It clearly has a bias which leans more toward the full-time and/or short-term trader than someone who traders longer-term and/or on a more part-time basis. This is a natural function of Brett’s work helping professional traders with their development and to overcome performance hurdles, along with his own personal efforts in the market, which are short-term in nature as well.

That said, there is still a ton of extremely useful material for any trader, new or experienced. [easyazon-link asin=”0470038667″]Enhancing Trader Performance[/easyazon-link] provides a sort of road map toward developing trading expertise. This isn’t about the mental part of actually making trades and managing positions. Rather it is more a discussion of how one becomes more than just a competent trader.

Coaching is a major theme, with Brett clearly being a proponent of traders having coaches who can assist them in their development similar to the way they would an athlete. I personally tend to disagree with the way he uses “coach” and “mentor” interchangeably as I consider the two to be different, but that does not detract from the overall message. Importantly, since it can be difficult for the individual trader to get in to a good coaching relationship, Brett shares plenty of tips and advice for how a trader can be their own coach.

The one major carryover from [easyazon-link asin=”0471267619″]The Psychology of Trading[/easyazon-link] is the use of the stories of actual people – either real or composite. They really help to drive home the points Brett is making, and in a fashion easily relateable by the reader.

In short, read this book if it is at all your objective to excel at trading. More than that, take your time and really absorb it. Read it once, then read it again. I know I will.

Trading Tips

Cross-over lessons for trading

Are you aware that I coach competitive collegiate volleyball? If not you are now! 🙂

This time of year is when the NCAA season runs for the women. As you can imagine, it’s a hectic time, with training and matches and travel. I have sacrificed my autumns to volleyball for the last nine years now (and a considerable number of other seasons of the year for even longer than that), but gladly so.

I love coaching. Through it I have had the opportunity to go beyond just teaching – and in that I mean the basic sharing information. Coaching involves motivation and the sharing of broader lessons. Those who have not been involved in athletics may not realize the value of what is learned beyond one’s sport, but they are some great life lessons.

Here’s an example.

The team I am coaching this year has more talent and experience than any I have ever work with, even those which were champions. That, though, is not enough. Championships are won, not given based on merit.

One of the attributes of a good volleyball player is the ability to forget about her errors and move on to the next play. Volleyball is a sport based on mistakes. It is very easy for a player – and a team – to get down on themselves. The result can be a nasty downward spiral in performance.

That sound familiar?

The exact same thing happens to traders. Losing trades can be demoralizing. Trading success can be predicated on how effectively one deals with losing, just as success in volleyball can be defined by how one rebounds from errors.

One of the things we coaches do to help our athletes become more resilient in the face of adversity is to put them in situations where they are likely to struggle, and they know it, but where the results matter little.

The team I coach is mid-level in Division I. We are not big enough or strong enough to really compete with the nation’s top teams, but that doesn’t stop us from playing them. This season alone the team has faced four teams likely to finish the year in or near the Top 25 in the polls, and one or two others who rank significantly higher than us.

Now that obviously seems like a recipe for losing a lot of matches. Fair comment, but we use those matches to prepare us for our conference play, which is the only thing that really matters. The players (and the team as a whole) develop the ability to handle adversity so that when it comes along later – as it always does – they can overcome it. Moreover, when they do well against very strong teams (which they have done this year), even in a losing effort, it creates a confidence that will carry forward later.

I have long been a proponent of getting in to live trading as soon as possible for the exact same reasons. A new trader who can take active part in the markets, but using only a small amount of money, will learn extremely valuable lessons for when they trade meaningfully later on.

This is just one of the observations I have made over the years in comparing athletics and trading – and by extension coaching sports vs. markets.

Best wishes in your trading.