On Becoming A Trader - The Science Behind Expertise
Trading is a different skill from any other.
It requires a belief-system shift.
But apart from that, trading is nothing more than any other performance skill.
The goal of any performer - athletes, musicians, chess players, traders... - is to take what starts out as effortful and make it automatic and effortless.
This is when the performer becomes ONE with the skill and no longer needs to think about what he/she is doing. It comes out naturally... automatically!
To become an expert, one needs to practice intensively. That's the secret to achieving peak performance.
However, it's not enough to repetitively practice a skill... One must do so with greater speed and accuracy.
There are 4 different ways of practicing.
And these constitute the 4 laws of expertise for any performance skill.
They are:
Practicing (quantity);
Mindful and focused practice (quality);
Practicing in different ways;
Practicing in adverse conditions.
Let's take the example of a piano player.
The piano player needs to practice a lot of hours in order to become a professional.
It's well known that 10 000 hours are needed to become a master in any skill - quantity.
Now...
We all heard that "repetition makes perfect"...
But it's not quite like that...
"Perfect repetition makes perfect"!
Perfect repetition means that the time you spend practicing is quality time.
The pianist not only needs to practice for 10 000 hours, but he also needs to practice in a mindful and focused state of mind during those 10 000 hours.
This is practicing with quality!
And this is a totally different story.
Mindfulness isn't all about meditation. This is a wrong idea.
Mindfulness is the state of mind of being conscious and aware of something. It allows you to live in the present moment and deliver your best productivity to the task you're doing.
The whole body and soul of the piano player has to be in playing piano and nothing more.
If he trains piano with a distracted mind, the probabilities are he's wasting his time.
The 3rd way a piano player becomes an expert is not only by practicing a lo, not only by practicing with quality but by practicing the same song in many different ways.
If the pianist wants to train a song, he needs to interpret the piano sheet in many different ways and then, play them.
So for example...
He would split the whole song into different parts; Those parts have different interludes where he would isolate which one of them and play one interlude many times: some slower, others faster; Then he would split the musical notes of that interlude to train even smaller parts; Then, he would come back to the bigger picture and play the different interludes in alternative ways. He can even play the left-hand part of the song first and the right-hand part second, just to consolidate the knowledge. And finally, he would play the music from the beginning to the end with both hands.
These different ways of playing the piano sheet allow the player to process the information in multiple ways which facilitate the learning process.
The 4th and last law of expertise is: creating adverse conditions.
Piano players train their songs very, very fast! So when they need to play it at the right time, it comes out effortless.
They basically turn the conditions of their training adverse so when the conditions are normal, they can play the song easily.
The same goes for focus - if they play with a distracting sound in the background, they need to force their attention and focus to play the song.
It's like a bubble they need to create around them in order to isolate themselves from the outer world and concentrate on what they're doing.
This is extremely difficult but if they are able to play the whole song with this distracting sound when it's time to play it for a big audience - when there's no sound at all - it becomes easier!
It's all about perspective.
Now let's transpose the 4 laws of expertise to the trading field:
The 10 000 hours rule applies to trading too. Traders need to see their patterns and strategy play out in the markets enough times until becoming experts.
The only difference is that we, traders, don't control the repetition of our skill. It's the market that delivers price to us and we can't make it roll faster. We need to develop the patience to let these 10 000 hours play out and catch the opportunities that fit our strategy!
This is why backtesting is so important in trading! It allows you to complete these 10 000 hours faster!
When you're backtesting, you control the repetition of your skill because you can scroll the candles at your own pace.
Backtesting is the unique way you have to fulfill 1st law of expertise faster - practicing in quantity.
Moving on to the 2nd law of expertise... traders not only need quantity but they need quality of execution!
While you're trading, you need to be with a focused and calm mind. Aware of everything... Not thinking about the future or trying to predict price but fully focused on what's happening at the moment... while adjusting the usage of your strategy to the information the market presents you with.
If you respected the 1st law of expertise, most likely you won't have problems with pulling the trigger when it's needed or remaining quiet when your strategy isn't there.
And this goes for everything: trading live, backtesting, analyzing your trades, collecting your data. All these activities must be done mindfully in order to retain information better.
What about the 3rd law of expertise?
Well, "practicing the same music in different ways" is something you don't even need to force in trading.
The market is always changing, the conditions in which you play your strategy are never the same.
This is what makes the trader's learning curve so difficult! The trader has zero control over the conditions in which he plays his/her strategy.
The more you train your strategy, the more you'll develop your unconscious pattern recognition skills.
These skills permit you to recognize your strategy fastly and, consequently, take action very fast - a fast decision-making process.
The more you develop your unconscious pattern recognition skills, the more you'll develop a thing called implicit learning.
This is a topic for another blog post but briefly, this implicit learning is what allows expertise.
Moving on to the 4th law...
How practicing the song in adverse conditions can apply to trading?
Just like chess players train with their eyes closed, you too can create adverse conditions that difficult the execution of your strategy.
How?
Here's a mental game you can do while you're trading:
When you enter a trade, picture the worst-case scenario in front of you: price goes in the opposite direction and you increase your stop loss; Price keeps going against your trade and you move your stop-loss even further away making you risk more than you can afford emotionally; Price keeps going in the opposite direction making you lose more and more money. Your ego grows with your emotions; Deep down, you just know price will reverse and so you just remove your stop-loss... until it's too late because you blew your account up.
Awful scenario, isn't it?
If you can close your eyes and picture this scenario for 2min the moment you enter a trade, then, when you open them again, you'll come face to face with a much more manageable situation - you just entered a trade, there's nothing to worry about!
Automatically, your brain will feel calmer and your emotions, less noisy. This is because you already experienced the worst scenario possible... in your mind.
It requires a lot of effort to do this exercise...
The way you manage your emotions is the biggest barrier to your success in trading.
So the only way you can create adverse conditions for you to perform your strategy is by creating them in your own mind!
This way, you'll slowly develop expertise with your strategy, emotions, and behavior!
Conclusion
In order to become an expert in trading, you need the 4 laws of expertise:
Practicing (quantity);
Mindful and focused practice (quality);
Practicing in different ways;
Practicing in adverse conditions.
Your emotions will always be the most difficult element of the equation but like in any other performance skill, you have to learn to deal with them the best way.
Last but not least, always remember that you cannot be an expert of the markets but you can be an expert in performing your strategy in the markets.
Leave a comment below with your thoughts on this article. Would be highly appreciated!
See you next time ;)
Sara
All i will say is never stop dishing out values to traders. Your words are changing my trading mindset lowkey. Even when i am not in your group, I am always excited looking forward to your weekly mails. Big ups Sarah. Thank you
Thanks you great insight in this article help a lot, of we need to apply it thanks
Thank you ❣️
Thanks a lot
It's very helpful
Very helpful with example and practical advice as always 😊
This is an excellent and very helpful article.
I realise, now, I started out "playing the piano" by myself making an endless cacophony of noise until my broker slammed the lid down on my fingers. That hurt a lot but, it inspired me to go and learn from good teachers... and with my broker always standing close by, waiting to slam the lid down again, I have a lot of incentive to improve.