IMPROVEMENT, GAMES, AND THE CORE ASPECTS OF TRADING.
Neural plasticity shows us that the brain has a virtually unlimited capacity for learning. You'll always be constrained in some way by your environment (e.g. liquidity in a market) but I like to believe there's no limit when it comes to cognition, extending to decision-making activities such as trading, your ability to manage a football team, or playing a game [until you reach those physical constraints]. Most activities have multiple aspects to them and improvement comes about simply by developing them. If you really have hit physical constraints in all aspects of an activity, you can continue to improve by changing to a similar activity which provides a new environment and begin developing there.Kai wrote: ↑Sat Aug 31, 2019 11:32 amIt's probably a crude analogy but in Football Manager every player has a hidden "Pressure" stat from 1 to 20 that tells you how well they perform under pressure. So knowing that stat, I know exactly what to say to my player during halftime to make them perform better, whether it's "no pressure, just play your game" or "I expect you to make the difference" etc. Another hidden stat in the game that can somewhat relate to trading is "Potential ability" that greatly varies from player to player, as harsh as it sounds some players in the game have their potential capped at a certain number and they will never improve past that point. I feel that every one of us traders has to try and make the most of his own potential no matter what it is, although it may not always be possible to do that for any number of reasons. I'm not suggesting that Eightbo has limited potential as a trader, quite the opposite, judging by one of his older videos that I recently saw I'd say he looks more like a wonderkid in FM terms.
That's great to hear, I always try to work smarter because it usually means that I don't have to work harder
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I try to be the best version of myself, I already know that it is an impossible task and that I will never succeed in becoming the absolute best version, but it won't stop me from trying.
Improving often involves work and as such commonly requires something driving you to do it. This driver (or lack of) is where I'll now differentiate between 'improvers' and 'non-improvers'. Regardless of what we're improving at, it's important we evaluate the potential benefits (output) for our efforts (input). Once the ratio passes a certain point, it becomes more efficient for us to change the activity and reap the benefits of improving there instead. The reality is most improvers either haven't passed that point, or they have and are pretending to themselves that they haven't so they don't have to endure the discomfort that comes with changing activity / having to put in work again. It's also common for improvers to tell themselves they've run out of activities to improve at which would contribute to their goals. Most likely, there are loads of suitable things out there but they remain invisible until either the driver becomes strong enough or they become aware of their aversion to the implied pain of change/unenjoyable work.
Improvers can 'work smarter', accelerating their progress and enjoy a higher ratio of results vs. effort by being aware of this concept and reframing their approach to improvement which I'll get to later.
Believing there's always room for improvement puts me in a good spot because even if I'm wrong, I'll plateau all the same. But if I'm right, I'm not capping myself with a limiting belief when actually there was room for further improvement. In the fighting game community, you'd call that an option select — one set of inputs which covers multiple possibilities (all if you can). I've made it a habit in my life to line up option selects wherever I can to ensure I'm capitalising optimally on opportunities (or at the very least, putting myself in a position to do so).
This leads me onto expectations — a key component in our trading.
A simple high-level overview of the core aspects of trading could be "Strategy", "Execution", and "Emotion".
I put together a model for my own trading in a notebook recently and landed on these four aspects:
> "Emotional Awareness" (monitoring decision-making quality & course-correcting efficiently where required)
> "Airtight Environment" (trading rules + execution of those rules)
> "Money Management" (I like to think of this as DEFENCE)
> "Edge" (OFFENCE).
The first three come under Risk Management and the last two make up our profitability. They're also in order of importance for my trading.
Above the four aspects, I have EXPECTATIONS from which they all stem. I view expectations as a somewhat of a filter which our decision-making passes through. This can be thought of just like how our decision-making is tainted when we're in an emotional state, except it applies to us even when we're in a calm state of mind. For a long time, I've been operating from a dirty set of expectations which were not accurate with reality. This incongruence is the source of most (if not all) of our emotional problems in trading. I'm becoming more introspective these days working to adjust the roots if you will so that they're more conducive for success. I see now that we can use our emotions as a tool to identify misaligned expectations. People throw around the word discipline a lot but I pose to you that it's all a load of bollocks. I started introducing loads of stuff that was uncomfortable but beneficial in my life like taking cold showers, sleeping on the floor, running etc. all because I thought I needed to become a more disciplined person to succeed in the markets. That's what everyone is saying in the world of trading and investing. BE DISCIPLINED. I say fuck discipline, what we need is emotional awareness coupled with correct expectations. I suspect my trading is going to go through the roof by the end of the year because of this realisation but time will tell.
I'm really satisfied with this model and it clicks for me. But when I first drew it up I actually OMITTED money management altogether, I mean that REALLY sums up my trading thus far. After I gave it some thought, I've always been this way in life (offence-orientated) — how I play chess, only training offense in games, playing ultra-offensive characters in fighting games, hell I was even a striker back when I played for a footie team. And conversely, I can't come up with any defensive examples.
A lot of people hear games and they think 'fun' but if you're playing anything seriously, and by that I mean you're actively trying to improve, it's actually about being reflective and often spending time grinding on the weaker aspects of your game even when you don't want to nor enjoy it.
My experience in competitive games has allowed me to interact with a myriad of skill levels and personality types and I've observed that a lot of these improvers are growing far slower than they could be compared to the level of effort they're putting in. These gamers are not working smart enough — they're putting their efforts into aspects which aren't producing results. Here's the key takeaway: We need to regularly check-in on our results vs. effort ratio and use that as feedback to guide us in our improving. In my case, I tried to brute-force discipline elsewhere in life EXPECTING it to fix to my problems at the screen. I couldn't follow my rules and everyone was saying you need discipline to follow your rules! It made sense and how could all these big traders be wrong? I thought. I went with it and that's fine. The flaw in my approach, however, was not utilising the feedback which was staring me in the face. I was actively working on my discipline, so I thought I'm improving... right?! And I was. A little. That's the painful thing about it. But my results vs. effort ratio was garbage. By not having an awareness of this concept my growth was massively hindered. I thought maybe I just needed more time, I just needed to become a bit more disciplined. You all know the saying "If it ain't broke, don't fix it.". I'd like to challenge that idea today and say that's an inefficient way to look at things. Instead, I propose we stay hungry for more. That we probe and tweak into the unknown. That we challenge what we think we know and believe there is a new way, a better way - if only we'd look.
The more proficient you become at an activity, the lower your ratio will usually become. Smaller gains for more effort. That means if you know there's a ton of headroom between where your current skill level and the physical constraints above you, you should be seeing a stream of steady benefits for your efforts so if that ever suddenly slows down or you're not really getting any results it's a sign that perhaps you should be placing your efforts on another aspect of your game. If you hit a wall in all aspects and run out of ideas, you can always consider another activity. We need to give our results some time to present themselves but it's important we don't settle for a poor ratio for too long. Raw effort alone is pointless if it's aimed in the wrong direction. So as improvers, it's key for us to nurture our understanding of the relationship between efforts and results. We must avoid staying dormant after recent surges in our results. Let these improved results become the new baseline and once you've squeezed all the juice out, welp, it's time to find your next juice source.
We know it can be fruitful to press on your strengths and should be doing so, just as we know there is a time for working on your weakest aspects (particularly when they make up the foundation / core of the activity) but the concept of continual improvement is not about either of those things. It's about ensuring there's a certain quality to it all and understanding that yesterday's improvements ended yesterday. Let's reframe our approach to improvement and begin asking ourselves "Where can I place my efforts where it'll get me the most mileage?" → then actively monitoring that mileage. For me now in my trading, it's all about working on my DEFENCE and my monthly goal reflects that.
Today's marks the 1st and I encourage all of you to set your own goal for this month if you haven't already done so. It should be process-based, targeted to a specific aspect/skill, and you need to define some means as to how you'll measure the improvement come the end of the month.
If you really think about it, trading is just another game. The market is the server, the participants are the players, it's zero-sum with winners and losers, and you deploy strategies based on decision-making in an attempt to 'win' — whether that's moments you use discretion when trading manually or putting thought into the variables of your automation.
I don't care what sport you trade or how good you think you are, there is always another level.
WORK SMARTER and get there.