“The wisest mind has something yet to learn” – George Santayana, philosopher, poet and novelist.
What did a 20th Century Spanish-American Philosopher know about trading?
We’ll probably never know, but what we do know is that he understood the importance of continuous learning and how it is such a critical part of growth as a person.
Whether it be as a ‘student of life’ or as a ‘student of the stock market’, continuous learning has the power to transform, bring happiness and assist us in achieving our full potential.
From a trading perspective continuous learning is the vehicle that can move us from an average, but competent trader to an ‘elite’ level of trading.
By establishing a process whereby you document your trading performance (feedback), analyze your results to identify areas of improvement and then design and implement a training plan (learning), you are creating a continual learning-feedback process that can accelerate the development of your ‘tangible’ and ‘intangible’ skills as a trader.
An important part of this learning-feedback process is to maintain a trading journal.
Keep a Trading Journal
A trading journal is an essential tool if you really want to take your trading to the next level.
Apart from catching the basics of the trade, the journal should also capture your thinking at the time of each trade.
It requires the ability to think about your thinking. A process known as metacognition.
It is a ‘critical thinking’ skill that, when done properly, can accelerate the learning process because you’re actively thinking about how you make decisions.
I won’t lie to you – most people find this a difficult process when they start.
I was certainly no different, but with time and effort I found the ability to mentally ‘step-outside myself’ and analyse my decision making became easier.
What should you record in the journal?
- Why you took the trade (what was your entry – i.e. setup, trigger);
- All your stops (what are your exit signals – i.e. stop loss, break-even point, profit protection);
- Your thought process at the time of the trade (i.e. when you entered the trade, during the trade period and finally when you closed the trade);
- The prevailing market conditions at the time of the trade (this can help you identify whether your trading strategy and market conditions are in sync);
- Whether your actions were consistent with your trading plan – (why/why not).
Keeping a trading diary is only the beginning, the real worth lies in what you then do with all the valuable information you have collected.
Continuous Learning
To achieve true mastery in your trading, one must embrace continuous learning.
As stated before, the best way of doing this is to establish a continuous ‘learning-feedback’ loop. By doing so you accelerate your learning, thereby improving your overall trading performance.
We start the ‘feedback’ loop by analyzing the trading data you captured in your trading journal (i.e. your trading performance).
The next step is to identify any trends or issues developing in your trading.
Two ways you can do this is to:
1. Ask yourself “Are my actions consistent with my trading plan?” – If not, start thinking about why your actions were inconsistent with your trading plan?
2. Have your trading journal audited by a spouse or friend – Ask them to look for any signs of bias in your decision making and thought processes.
If you identify trends or issues developing in your trading, think about the types of development strategies you can implement to ensure your actions become more in step with your trading plan.
If you identified biases in your decision making, consider what measures you can take to reduce the impact of these biases on your trading.
These development strategies and measures form the basis of your training plan.
Develop a Training Plan
The aim of a training plan is to develop exercises that will correct any gaps in knowledge or issues in performance. The creation of a training plan need not be a complex task.
At a minimum your training plan should define:
- Your Objective (Knowledge and/or Skills you want to develop);
- Training Mode (Will the training be: Theory or Practical Based?);
- Lesson Structure (Deliberate repetition of: Analysis, Simulation, Testing, etc, and the expected Time Frame for completion);
- Evaluation (Measuring the outcome against your objective);
- Resources & Materials.
Depending on your objective, you may require theory based training to bridge a gap in your knowledge or a more practical based solution to correct a performance issue.
Practical solutions typically involve a rigorous program of deliberate practice whereby you repeatedly practice a single skill over and over until that skill becomes ‘automatic’.
The idea behind deliberate practice is to condition yourself through repetition, until the execution of the desired skill (or action) becomes instinctive.
Be warned this is not a pleasurable task.
It takes a special type of character to repetitiously practice an action or skill. And is a common trait amongst elite athletes and sportsperson, as well as master traders.
Closing the ‘Learning – Feedback Loop’
The final phase of the learning-feedback process is to re-visit your trading performance. Again, you want to record your actions, thoughts and results in your trading journal.
However this time when analyzing the results you are not only looking for any issues in your trading, you’re also evaluating the results of your training program against your original objective. And if need be, you create another set of training plans to correct any deficiencies.
And so the process continues.
In closing I’d like to make three points:
- If you find the process difficult or you’re not seeing the results you desire, find a mentor or trading coach who can provide guidance;
- If you notice an improvement, reward yourself. Buy yourself a small ‘gift’ or take your partner to dinner, etc. Find a way to reward yourself when you see that your hard work is starting to pay off.
- Finally, have fun, enjoy the process.
Conclusion
Top traders and investors are continually looking to enhance their knowledge and skills. They track their performance, analyze the results, plan and implement a strategy that targets a particular problem area.
If you genuinely want to see an improvement in your trading results, start maintaining a trading journal and then establish a continuous ‘learning-feedback loop’.
If you can’t wait until then, I recommend you download my FREE Manual ‘The No Bull@#t Guide to Achieving Profitability’.
You can get instant access to the Manual by simply entering your email in the ‘sign up’ form at the top of this page.
‘Til next time, I wish you the ultimate in trading success.
