How to leverage practice time to improve your trading process

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The Trader’s Couch series explores trading psychology and the behaviors many traders have that undermine performance,  then offer practical solutions traders can employ to get past the roadblocks.

The Trader’s Couch

The Problem 

Many aspiring traders often wonder how they can get better at the craft of trading. Even seasoned traders ask the same thing as markets change and they find their game plan is no longer working very well. Most often folks in this situation dive into books and other resources to start studying about a new skill set. They may dive into books on technical analysis, fundamental analysis or something about a new trading method.  After a diligent amount of studying, they take their new skill set for a test spin and they fail. Then these aspiring traders assume they missed something and head back to the books.  It’s the studying doom loop.  Once you’re in one, it’s hard to escape.

Studying and Practicing are profoundly different

There is real wisdom is the statement above. Generally speaking, you can learn more by doing something for an hour than reading about it for 10 hours.  Yes, by all means, you’ll need a certain amount of time gaining familiarity and knowledge of a new topic via book work, but make doing the focal point. This holds true for anything.  If you want to play better golf, practice golfing. If you want to trade with a new set of technical indicators, trade with them. It’s fine to work with them on a paper account first. Discover their benefit and limitations by using them. It’s the only way you’ll find out if those new indicators work for YOU. So if practice is the key to rapid learning, what is the best and most efficient way to go about it.?

Deliberate Practice is efficient and impactful

Unlike mindless trial and error, deliberate, or mindful practice is a systematic and highly structured activity.  It is an active and thoughtful process  of hypothesis testing where we relentlessly seek solutions to clearly defined problems.

Deliberate practice is often slow, and involves repetition of very specific skills.  For example, if you were wanting to incorporate RSI and PPO indicators into your TA arsenal, delete your other indicators and intently focus on how the RSI and PPO behave at inflection points.

Deliberate practice also involves monitoring one’s performance in real-time continually looking for new ways to improve. This means being observant and keenly aware of what happens, so that you can tell yourself exactly what went wrong. Say you are working on identifying reversal patterns. You can record your training session, then afterwards make notes about how well you both identified the reversal pattern and how you traded it afterwards. These notes and observations become the basis for corrective action the next time through.

Another way you can use recordings is in reverse. Say you work all day and cant be actively involved trading. Set your recording software up to record the morning session. Then at your convenience replay the session and trade it as you focus on the reversal patterns. You can run the replay at 1.25x or 1.5x normal speed to make your session more efficient.

You can tweak the process as you see fit.

How to Accelerate Skill Development

Here are the five ideas that you can apply to accelerate your skill development.

1. Focus, Focus, Focus 
Keep practice sessions limited to a duration that allows you to stay focused. This may be as short as 10-20 minutes, and as long as 45-60+ minutes. This may also have implications for your actual trading. If you find that the longest time you can really maintain focus is 90min, then that may be a practical limit for your trading. So evey 90 min of active trading you may take a 15-20 min break before diving back in to your trading.

2. Time of day matters too. : Keep track of times during the day when you tend to have the most energy. Some traders find they trade the morning session well and then they tail off in the afternoon giving back morning gains. For others its the opposite.  There are many traders who only trade when they are at their sharpest and not prone to self-inflicted mistakes. Try to do your practicing during these naturally productive periods, when you are able to focus and think most clearly.

3. Don’t trust your memory: Keep a detailed log of your practice sessions. Plan out your practice, and keep track of your practice goals and what you discover during your practice sessions. Again, the key is to have a crystal clear idea of what you want to focus on and accomplish. Be relentless in your search for ever better solutions.

When you stumble onto a new insight or discover a solution to a problem, write it down! As you practice more mindfully, you’ll began making so many micro-discoveries that you will need written reminders to remember them all.

4. Effective Goal SettingEffective goals should break trading down into component skills and then set targets for these one at a time.  Learning these component skills is hard enough as it is so imagine the difficulty trying to learn multiple skills all at once. It muddies the waters and makes it nearly impossible to segregate one from another. So keep it simple, set goals for one skill at a time.

5. Stay on target with a problem-solving model: 
It’s extraordinarily easy to drift into mindless practice mode. Keep yourself on task using the 6-step problem solving model below.

  • Define the problem. (What result am I expecting vs the results I get )
  • Analyze the problem. (What is the root cause of the problem )
  • Identify potential solutions. (Try to identify the top 3 likeliest solutions )
  • Test the potential solutions and select the most effective one. ( Tweak the solution that works best for you )
  • Implement the best solution. (Practice your remedy and integrate it into your trading framework / process )
  • Monitor implementation. (As you move from practice to live trading, monitor your progress. Are you seeing more consistent results? )

Make Your Time Count

In many respects, time is your most valuable resource. If you’re committed to improving your trading, adopt the methodology of deliberate, mindful practice outlined above. It’s the most efficient way of making rapid progress in the least amount of time. Once you learn the skill of practicing, it will stay with you for the rest of your trading career. Markets change over time. What works today may hopelessly fail down the road. There will be a time when you’ll be forced to learn and practice new skills as a trader.  The best time to start is now.

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As the host of Trader’s Profit Compass, I work hard to inspire, empower, and prepare aspiring traders to face the markets with fortitude, quiet confidence and inner calm. It’s a protein-rich, sugar free environment without ego or judgement. While I can’t promise that joining our group will change your life, I’d like to think it will help your trading. Give it a spin!  Nothing to lose and potentially much to gain.

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