The Art of Learning

Hi All

This is Ana Wang. I’ll be taking over the responsibilities of Ray’s Blog while he recovers from his hip replacement. Over the next two days, I shall publish blogs Ray wrote. On Friday, I shall be making an announcement of interest to Nature of Trend buyers.

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One of the inevitable questions I was asked in Ho Chih Min City: “If you are such a good trader, why are you teaching us?”.

I have told readers of this blog my motivation in other posts. In this blog, I’d like to examine the hidden assumptions behind the question. I see at least two assumptions that need addressing:

  1. If you have something good, you will not want to share it. And,
  2. Can I learn to do what you do? This second assumption may need a little explanation. The ‘hidden’ thought is – ‘you’ll only teach me something good if you believe I can’t apply it or if you believe it’s no good’.

I have to say that I do get  such  questions in Asia. Perhaps, it’s a cultural thing. When I was learning the martial arts, a recurring idea was that the Chinese Kung Fu masters would keep back their best techniques; they did not want their students to surpass  them. Western tradition on the other hand, tends to emphasize that both student and teacher benefit as knowledge increases so that  the future builds on the foundations of the past.

The second assumption caused me some moments of reflection. The seminar industry in trading follows a well-beaten path. Generally, we teach (1) some method that has worked for the instructor coupled (2) with a few ideas relating to psychology and risk management. As instructors, we give lip service to (2) and spend most our time teaching (1).

This is not altogether unreasonable when you consider that both psychology and risk management are born from a set of written rules with an edge. I see the relationship as a circle with the centre being the plan and concentric circles (risk management and psychology) radiating from that centre. Each outer ring is more important than the inner one but each outer ring cannot exist without its inner counter part.

Once I started to think of  this, I started to examine its validity. My main educational market are the prop traders in banks. I started running some experimental courses drawn from that source. If you know anything about bank traders, you’ll know that  their ‘money management’ thinking tends to go no farther than their limits and maximum losses. But the friends and acquaintances to whom I taught the course, started to show improved bottom line results.

Now it does not follow that because professional traders benefit, it means that retail traders will follow suit. But I’ll know by  around February 2009. In August and September 2008, I’ll be conducting the same course for retail traders. In the course, I focus on building habits around position sizing, trade management and keeping two journals: an equity and a psychological journal.

The position sizing and trade management relate to building good habits for risk management; the journals identify empowering and disempowering patterns. Yes, I do cover a plan but it’s just a plan. Sure it has an edge, but I have seen plans with greater edges. But here’s the point. Unless we master 1) risk management and unless 2) we learn from our mistakes, the most robust plans in the world will not make us money. On the other hand, if we master the two, then any plan with an edge will start to bring us the success we want.

Think of it  this way: Unless you can manage the fundamentals of your golf game, having the best equipment will not make that much of a difference; on the other hand, if you are a skilled player, then the quality of the equipment may be the difference between winning and losing. So too with trading: unless you master the habit of learning from past experiences and risk management, the quality of the trading plan will make little difference. On the other hand, if you have those skills mastered, then the better the edge of your plan, the better your bottom line.

Tomorrow I’ll outline the training process I have found that brings the best results.

Speaking of self-training: Dr. Brett Steenbarger is providing yet another avenue for the retail trader to improve. To see what I mean, go to: http://becomeyourowntradingcoach.blogspot.com/2008/05/welcome-to-new-blog.html

The first advertised topic sounds fantastic!

How to use Excel to identify historical patterns in markets

2 thoughts on “The Art of Learning”

  1. Standing aside now to stand in for Ray, I would like to add what I believe is universal.

    When we look at top successful traders or investors, or entrepreneurs, there is this desire to impart some knowledge or benefits which are the fruits of their ‘crops’ back to society at large.

    Without this ‘charity on their part’, specific knowledge will die with them and the world will be a poorer place.

    In history, we have also witnessed that due to selfish motives, a nation with rich inventions , could end up losing the knowledge gained, eg old China, inventor of gun-powder, etc.

    Ana aka IDkit

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