Deliberate Practice; Overtrading

Trading is often about how to take the appropriate risk without exposing yourself to very human flaws.
eightbo
Posts: 2154
Joined: Sun May 17, 2015 8:19 pm
Location: Malta / Australia

This thread sure got lively.

stueytrader wrote:
Wed Sep 25, 2019 9:43 am
eightbo wrote:
Fri Sep 20, 2019 1:36 pm

I should add that what we're deliberately practicing needs to be the 'correct technique' i.e. something that's actually going to improve your trading — You can go through the discomfort of learning the precise motions of a bad tennis serve until you have it down cold but would that actually help your game? If it was the first serve you learned you'd probably even be net-disadvantaged for your efforts.
This is a key point - what exactly are we talking about 'practicing' here? Specific behaviours or trading activity? Or a wider set of rules, like your limits on number of trades?
stueytrader wrote:
Thu Sep 26, 2019 3:31 pm
Down to the individual is a fair take to some degree, but that just leaves it open as to whether you are choosing to practice the 'right' areas of your trading? Or even doing anything positive with your practice.

I had presumed the OP was suggesting there were some specific examples to practice?
Both are true. I was suggesting there are specific examples but what's optimal for one trader is probably different to another.

The skills which are most effective to train up will depend on:
  — the trader's current skill level (proficient areas usually get a pass until all your areas are up to scratch)
  — how they interact with the market (what they're doing to make/attempt to make money)
  — their personality (what you're practicing will be filtered through this so avoid conflict for faster progress)

As far as specific examples go, I'd suggest reframing from thinking of traditional skills such as:
    working on your ability to read the markets through experience (to better inform your trade management e.g. cut a position b4 it reaches your stop)
or practicing holding your winning trades to their full potential until your used to it (to increase W/L ratio & boost results)
...to thinking about skills as HABIT CREATION.
 Want to get good at something?  Do it all the time until it's automatic.  Can't make it automatic?  Reassess. Adapt.

Given our main goal is to make £€$ in the markets your results should be your starting point in identifying what will benefit you most to train.
As an example let's take a novice trader who trades well most of the time but also has the occasional rocky patch. Their edge is decent but the rocky patches give back large amounts in a short period of time compared to their usual trading. The trader can ask themselves: "What new habit can I form that would probably prevent my rocky patches?". The trader backtests their results and identifies that by ending the session early after a loss of -£X amount in a single market, they can boost their bottom line massively.

As a 2nd example let's take an experienced trader who has a great edge in the markets and executes it extremely well thanks to the various successful habits they've formed over the years. This trader doesn't even get caught out by outages, they have appropriate counter-strategies for every scenario that pops up. This trader is happy with their results but they've been doing so well for so long that things have become easy for this trader and they begin to wonder if they could make more. The trader can ask themselves: "What new habit can I form that would probably boost my results if I put in a little extra work?". After some brainstorming, this trader identifies that by swapping every other Netflix binge session for time spent exploring new market types with bigger volumes, they figure given their experience/knowledge there's a reasonable chance they'll land on something useful.

Some time passes and unfortunately, our first trader runs into a problem. For no lack of trying, this trader for whatever reason can't stop themselves trading when their rules say to. They've discussed the issue with other established traders and have consistently pursued all the methods they could think of over a few months but nothing seems to work. This trader read a post on the BA forums and realised that the likelihood of them overcoming this problem was declining over time and has now probably declined enough so that it's more efficient for the trader to deliberately practice something else.

Instead of wasting their time continually practicing what I referred to earlier in the thread as "a bad serve", this trader has learned and accepted that big losses are problematic for their personality to deal with and asks themselves "What new habit can I form that will prevent my losses becoming -£X amount in a single market?". The trader now switches their efforts to time spent in Excel analysing previous trades and starts to prune out all the setups which carry a higher risk (regardless of their reward), aimed at ensuring losses stay comfortably below -£X.

Our 2nd trader hit the ground running and within four weeks they realise that with a few minor adjustments, one of their existing strategies seems to work fairly well in one of the bigger markets. This trader gives some thought to the potential here and decides to drop the other market types they were exploring and changes that every other 4-hour session to two out of three 4-hours sessions, pressing harder now they've found a potential fruit source. More months pass and this trader ends up focusing solely on the new market type, ditching all of their old stuff and is enjoying a huge boost in profitability. They're now happy with the returns they're getting for the work they're putting in and so they accept that deliberate practice (and any discomfort that accompanies the forming of new habits) can now go on the shelf for their trading and they wonder if they should now begin to apply the concept of deliberate practice to their relationship. This trader decided to go back to binging Netflix.

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Side note for personality & why the first trader accepted his fate with regards to big losses:
Many of our beliefs about the world (and therefore trading) are formed as a child. The world is simply a CONSTANT BOMBARDMENT of information. At any one time, your brain's filtering out a ginormous amount of information in the background into useful/not useful. This sorting is not possible at a young age because you have no frame of reference so instead you just sort of accept what's around you. These beliefs are not necessarily set in stone, more like a sort of quicksand which has a strong pull and takes a certain technique to escape. Certainly doable but usually far more efficient to adjust your trading approach rather than your belief systems. I think psychology in trading is useful for AWARENESS. Rather than identify→overcome our mental obstacles, it's better to identify→swerve them.
stueytrader
Posts: 863
Joined: Tue Dec 15, 2015 6:47 pm

Fair bit to digest there, with some good examples.

I think I see the central idea a little more though, so a useful area to consider.
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