Saturday, December 19, 2009

Creating Your Learning Culture

If I had to identify one characteristic that separated successful traders from their less successful counterparts, I would say that the successful ones maintained what I call a learning culture.

A learning culture is one in which there is an explicit philosophy and set of procedures to reflect upon recent experience, extract lessons from that experience, and use those lessons to guide future experience.

While such a culture can be maintained individually, it becomes exponentially more powerful when it is shared. Imagine a small group of people, each of whom is extracting lessons from experience and sharing them with all the others. The net effect is to condense time: a person has gained a week's worth of experience in a day, simply by assimilating the lessons of others.

This condensation of time is essential to a field such as trading, in which the learning curve may outlast one's bank account. Most of us have heard of the "ten year rule", which states that expertise in any performance field requires a minimum of ten years of learning and deliberate practice. Clearly, most of us cannot afford ten years of our lives to learn to master financial markets; few trading firms could or would support such an extended process.

Within a learning culture, however, a trader can gain ten years of experience in a fraction of that time. The key is learning from others and making use of proper tools for exploiting that learning.

Imagine, for example, that I am trading with a group of four other people. At the end of every trading session, each of us shares, via video and with annotation, his or her best trade of the day. Those videos and explanations are reviewed intensively, providing high-yield access to multiple trading patterns. Over time, those patterns are reinforced--and each of the traders is seeing many times the patterns of the average trader.

Sadly, few trading firms make concerted efforts to embody such learning cultures. Whatever mutual learning occurs is the result of informal conversations and occasional collaborations. Because the traders don't hang together, too many hang separately.

Just one learning colleague can double one's rate of growth; conducting learning in groups can turn a 10-year rule into a several year one. It is no accident that the same training facilities--whether in boxing, chess, college sports, or the arts--produce leading performers year after year. Nor is it an accident that the world's leading laboratories produce consistent world-class discoveries; that the world's leading educational institutions generate the best scholarship.

Culture counts. When you're surrounded by high performers, it brings out the best in you.



JimRI said...

Dr. Brett,

Thanks for your great posts. For me and I suspect others who work alone, your blog and others are my sustitute for a trading group. However, a group in the same room sharing experiences would probably be better - particularly if the others are pros.

TradeWave said...

Thanks Brett again for your great insights. I've been subscribed to multiple blogs such as Quantifiable Edges, Alpha Trend, Cobra's and a few more including yours. I have learned a tremendous amount from all of you, but I am still missing the ability to communicate and share experiences with a trading group that share the same trading style and niche that i am in.
I wish there was an additional filter in StockTwits where you would be required to fill in a survey on your trading style/personality, which would then automatically filter a group of traders that have similar characteristics to your style of trading. I think this would be very helpful in speeding up your learning curve.

Andrew Palladino.