Home / Practice, Skills And Performance – How To Improve As A Trader

Practice, Skills And Performance – How To Improve As A Trader

To become better at anything, you need to practice and develop your skills over a long time with consistency. Soccer players can work on their physical skills and their ball handling skills, musicians can rehearse their plays and chess players can analyze the best plays. In trading, the skills are not as obvious and your practicing possibilities are limited. However, there are multiple ways how a trader can become better and improve his skills.

 

Practice, expert performance and trading

But first, let’s review what the research about practice and expert performance discovered and how trading fits in. The 5 following discoveries and statements have been extracted from the journal “The Influence of Experience and Deliberate Practice on the Development of Superior Expert Performance” by K. Anders Ericsson and we explain what they mean for traders.

 

1) Practice is designed to improve specific aspects of performance in a manner that assures that attained changes can be successfully measured.

In trading: Becoming better and improving some areas of your trading due to practice has to have a measurable effect on one’s performance. Without tracking performance, in whatever field and profession, it is not possible to quantify the effect practice has, or whether it has any effect at all.

 

2) The principal challenge to attaining expert level performance is to induce stable specific changes that allow the performance to be incrementally improved.

In trading: You do not have to go from 0 to 100. The key to long-term success is consistent and steady short-term improvements. Furthermore, goals that seem too big at first glance can have an intimidating and paralyzing effect.

 

3) Once we conceive of expert performance as mediated by complex integrated systems of representations for the planning, analysis, execution, and monitoring of performance, it becomes clear that its acquisition requires a systematic and deliberate approach.

In trading: How do you approach your trading? As we will see throughout this article, a structured and analytical approach is the most effective way to improve as a trader. Every day, write your trading plan, follow the same routine, analyze your trades after they happened and enter them in your journal. Consistency, effort and attention to detail are key attributes to effective practice.

 

4) In their research on sports, Deakin and Cobley (2003) found that ice skaters spend a considerable portion of their limited practice time on jump-combinations they have already mastered, rather than working on the yet-to-be-mastered combinations, where there is the largest room for improvement.

In trading: Don’t try to reinvent the wheel. Focus on what you are already good at and improve in this field. If you are a decent technician, do not suddenly start to learn about fundamental analysis. Stick to one approach, learn and master the basics before exploring other fields.

 

5) The effects of mere experience differ greatly from those of deliberate practice where individuals concentrate on actively trying to go beyond their current abilities.

In trading: Just staring at your charts and acquiring ‘screentime’ will only have a limited effect. Follow a structured and analytical approach that will have a measurable effect, rather than aimlessly flipping through trading instruments or timeframes hunting for entry-signals.

 

 

Trading skills and becoming a better trader

To improve as a trader, you should work on your skills and attributes and focus on spending your energy where it will have a positive effect on your trading. The following attributes and skills are necessary for a trader to develop.

 

Discipline 

Discipline in trading encompasses a variety of different aspects. First, you have to be disciplined to follow your rules. Premature and impulsive decisions where a trader violates his trading rules are a very big performance killer. Second, you need the discipline to regularly write a trading plan for the upcoming trading days and also be disciplined enough to journal all your trades afterwards.

 

Patience 

Knowing when not to trade is often more important, especially for new traders. This coincides with the previously mentioned aspect of discipline.

 

Focus

How does your trading day look like? Do you randomly flip through timeframes and various instruments, hunting for entry-signals while watching TV, browsing through the web and chatting with other people? Trading is a performance activity and you cannot expect to outperform the market while treating trading as a sideline. While trading, do nothing else! Focus exclusively on your charts and your routine.

 

Independence

If you are looking for other peoples’ opinions to justify trade decisions, long-term success in trading is a long way away. It is important that traders make their decisions self-determined and independently. Your trading system should provide the framework for all trading decisions and you have to follow it religiously.

 

Planning

We touched it briefly and we mention it again. Planning your trades ahead of time is important. A trader needs to develop the discipline to write a structured trading plan BEFORE the markets open. If you arrive at your trading computer unprepared, clueless of what to expect, you haven’t done the necessary work.

 

Record keeping

Together with a trading plan, a trading journal is the #1 tool when it comes to developing trading skills. If you do not track what you have done, it is impossible to know what to change to become better. Keeping a trading journal requires effort and discipline, but this is what developing skills and practicing is all about.

 

Analytical skills

Analytical skills help a trader to process data and information quickly and efficiently. Whether you are a technical trader and specialize in pattern trading or are a fundamental trader who analyzes company and economic data, you are usually dealing with recurring patterns. The better you know your material, the less time and effort is required. And finally you can make trading decisions faster and more efficiently without consciously thinking about it all the time.

 

Honesty and responsibility

This brings us to the last and most overlooked attribute. Amateurs and consistently losing traders are delusional up to the point that they attribute their repeated failures to market inefficiencies or unfair and unforeseeable circumstances. They do not see that their own actions and decisions are causing them to lose money.

Tracking your trades and performance in a trading journal removes all subjectivity and confronts you with hard facts. Only if a trader acts fully disillusioned and accepts complete responsibility for all his results, he can develop and improve his skills.

 

 

Conclusion: Plan your trading success

Becoming a profitable trader is not an accidental product – it requires time, effort and obeying certain principles. In any profession and field, developing skills requires deliberate practice and trading is no different. The Edgewonk trading journal takes out the guesswork, presents only hard facts and shows you exactly if your approach is working or not. But even more important, with the customization features, it shows you specifically and exactly where you are losing money and why. A trading journal is the tool that helps traders to build a professional set of skills by following a structured approach.

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