A long-time (and very successful) friend of mine recently recommended a Freakonomics podcast to me. The podcast was entitled “How to become great at just about anything” and focuses on decades of work done by a Swedish psychologist, Anders Ericsson.
The podcast discusses how to get better at an activity, whether it’s professional such as
music, or a hobby such as golf or chess. They discuss the concepts of deliberate practice, the role of talent, the role of hard work, and the 10,000 hour rule widely known from Malcolm Gladwell’s Outliers book.
Trading is not mentioned during the podcast.
Some of the key points for me:
- ‘Excellence’ gets better and better over time – humans have improved significantly over time in the area of music, marathon running, golf, chess or 100 meter sprints – the benchmark is continuously being raised – this is result of more and more targeted practice, access to shared knowledge and better coaching
- Big difference in effectiveness between general training and very specialized targeted training
- Deliberate training requires coaches experienced in taking students through the process and improving their performance
- Targeted/deliberate practice generally puts the student outside their comfort zone
- Being outside comfort zone triggers body and brain to change – example: fitness only improves if person runs beyond 70% of maximum heart rate for 30 minutes at least three times per week – there will be no improvement if the student stays within the comfort zone
- Deliberate practice often focuses on just one single aspect and thus allows more detailed feedback – the goal is to find errors as this then allows for improvement
- Avoid going on auto-pilot – because then improvement stalls
- 10,000 hour rule – always requires a support team to be in place for the student – consider that even if allowing ten years for the 10,000 hours to be completed, that would equate to 20 hours of practice per week for 50 weeks/year – how many individuals can dedicate so much time to their pursuit?
A further article, written by the same author who was being interviewed in the above podcast:
Applying some of this material to my trading …
- Can I break my trading activities into very specific components, each of which I can then practice individually, with specific objectives, examples:
- Trade Reviews (of executed trades)
- Chart Reviews (for missed setups & strategy development)
- Entry selection
- Trade Entry
- waiting for slight pullbacks, market v limit orders
- Chart Analysis for assessing levels and trend
- Position Management
- Visualization/mental exercises
- Am noticing that each area naturally divides into further, more specialized areas, each which can be practiced diligently
- How can I avoid working long hours with the aim of “generally improving”, and move into more targeted and deliberate practice?
- I can see how improvement occurs in golf (lower 18-hole scores) or running (faster times) – but in trading, it is a battle between market participants – there will always be winners and losers – this compares more to tennis, poker or other component games. What implications does this have?
- Who can help and guide me through the deliberate practice?
- Does this material shed light on why I regularly experience pain in my trading – because I regularly put myself outside my comfort zone?