Saturday, February 28, 2009

Toward A Fresh Vision of Trader Coaching and Mentoring

Before moving forward with a fresh framework for the coaching of traders, let's review the key ideas from recent posts:

* Markets communicate patterns of supply and demand at all time frames; following and responding to these patterns is similar to a psychologist's following and responding to the communications of others in counseling;

* Effective trading requires an ability to listen to markets; most psychological trading problems occur when personal needs, reactions, and biases interfere with an open-minded processing of market communications;

* Markets can be understood, not only by what they do, but also by what they fail to do. A market that fails to follow an expected historical pattern, for instance, is communicating something of importance regarding current supply and demand;

* The optimal coaching of traders can be conceptualized as a supervisory process, much like the training models in psychiatry and psychology by which therapists are developed over time. This is significantly different from coaching models that are grounded in weekly individual or group talk time (therapy model) or time-limited workshops/seminars (education model).

* Because competence and expertise typically develop over years of practice and supervision across all performance fields, models of coaching that are highly time-limited and not grounded in actual trading practice are not likely to be successful in facilitating the learning/mastery process required of traders.

So, if we draw upon the structure of training programs in such fields as medicine, law, performing arts, athletics, and military, what might an optimal coaching program for traders look like?

* It would start by building a fund of knowledge - Traders who try to learn the ropes by immediately placing their capital at risk are like rock climbers who try to learn by immediately tackling the highest mountains. As I stress in my performance book, there is no "minor leagues" of trading; no exchanges where everyone participating is either inexperienced or an idiot. From day one, traders always trade against pros. For that reason, traders begin by learning about how markets operate, how they move, why they move, and how traders read their movements.

* It would teach pattern recognition before intervention - A medical student first learns pathology and introductory clinical medicine before ever working on a patient. You can't heal if you don't know the difference between health and illness. Similarly, a student of the markets needs to learn patterns of supply and demand and various structures to market days and weeks before developing and executing trading plans.

* It would emphasize mutual learning and mentorship - Observing actual trading and the decision-making of more advanced students would precede one's own real-time market activity. Just as a junior medical student follows a senior student and beginning resident (intern) around the hospital, a junior trader would observe the learning and performance of more senior traders.

* It would entail ongoing supervision and performance review - In the military, there is always an after-action review to learn from operations that have been undertaken. Similarly, the work of medical students and residents is always supervised and reviewed by experienced attending physicians. In team sports, players will often break into groups for drills that are overseen by coaches and assistant coaches, with immediate corrective efforts as needed.

* It would combine group-based learning with individualized training - Learning in groups allows students to see the mistakes (and strengths) of others and learn from those via observation. Individualized learning enables students to identify and work on strengths and weaknesses unique to them, focusing on specific performances.

* It would be affordable - The beginning levels of training, focusing on fund-of-knowledge and pattern recognition, can typically occur in large didactic settings. For example, at my medical school, the entering class was about 150 students and all students took the same introductory courses in large lecture halls. Later, the training became more individualized in clinical rotations (group based) and work with individual supervisors. By delivering material in the best possible format according to a structured curriculum, training can be educationally and cost effective.

Perhaps the best model for training and development can be found, not in medicine or athletics, but in the spiritual disciplines. Think about the learning process that occurs in monasteries, Yeshivas, ashrams, and even martial arts centers. These involve several elements that have been crucial to their long-term success:

1) They are structured as committed communities, in which everyone is both student and teacher;

2) They are led by one or more accomplished individuals who provide the community with a sense of values and direction;

3) They involve a degree of withdrawal from the everyday world to facilitate a daily commitment to learning;

4) They are not primarily commercial entities, but instead seek mutual "profit" in self-development and participation in the development of others;

5) They develop multiple leaders and teachers, encouraging diversity of learning and thereby becoming self-sustaining. This is what differentiates true learning communities from cults that focus on a single "guru" leader.

The beauty of intentional trading communities is that, in seeking self and mutual learning and development, participants also profit and prosper financially. There is no dichotomy, so often seen in present educational efforts, between the learning needs of the participants and the financial interests of the educators. This is because the participants are the educators and the educators are the participants.

At one time, the barriers to the development of intentional trading communities and training programs were technological. It is not practical for people to uproot their lives and relocate to communities that may be located across the globe. At present, however, the tools for online learning and communication make it possible to sustain communities across national boundaries and far-flung time zones and markets. All that is needed is vision, values, and a curriculum that joins participants in mutual student/mentor roles.