Blog

[dc]O[/dc]ver the past few months, I’ve been doing a lot of thinking and researching, and have been exploring some exciting new directions. Some of you have worked through my free trading course. (If you haven’t, I’d encourage you to check it out.) I’m sure you noticed the project stalled a few modules short of completion, and I do have “week” 7 coming very soon, so keep an eye out for that in the next week or two. Publishing this material, and interacting with people working through it, has been interesting, and, as I said, I have found myself drawn to explore some exciting new directions. Today, I just want to raise some questions, and show you some of the directions I will be exploring in future blog posts. Don’t look for answers today, but prepare yourself for questions—and some of them will be very difficult questions indeed.

One of the most interesting things has been to look at how people learn a high level skill like trading. Much of the trading literature focuses on the “10,000 hour” rule. The classic “nature or nuture” debate, at least in trading circles, seems to have been settled soundly in favor of nurture: virtually everything that comes across my desk or computer screen written for the developing trader emphasizes that all you have to do is work hard, work properly, focus, apply yourself, and success will follow. The current thinking, very much in pop-culture vogue (is that phrase redundant?) is that talent is a misnomer and anyone can be anything they decide to be, if they practice properly, hard enough, long enough, and have the right tools. I realize this will be an unpopular perspective, but what if that is wrong?

I’m also wondering if pop science is really constructive, or if it is actually dangerous: the “10,000 hours” is, at best, a gross generalization of a specific research, but now we say that all you have to do to excel in any field is to put in your 10,000 hours. Is this true? That was not at all what the original research showed, for some people achieved mastery in much less time, while some people never did. Right brain/left brain? Doesn’t work at all like we have been told. You use less than 5% of your brain? Not true. I could go on, but one of the things that has hit me over and over as I’ve dug deeper into these topics is how misleading so many of the glib pop science quotes are. At best, they are unsubstantiated, but, at worst, they are wrong and can lead to some dangerous conclusions.

I’ve also been thinking a lot about what excellence means. I have tremendous respect for the empire that Tim Ferriss has built (and I have to say I enjoy the irreverent approach of his books and his writing style). I was intrigued by the idea behind The 4-Hour Chef, which is that anyone can become “world class” in any endeavor in six months—but I had to ask the same question, is this true? Tim’s idea, utterly logical, is that what we must do is reduce any discipline to its essentials, and concentrate on those. There is a lot of truth here, and this is basically the 80/20 rule (that 80% of the benefit from something comes from 20% of the work, and it becomes exceedingly difficult to squeeze benefit out of the last percentages of work), but the devil, as they say, is in the details. I’ll dig into this in a lot more detail in some future posts, but the overwhelming question I found myself asking again and again is are we simplifying mastery too much, and missing the essential things? If so, this maybe we are teaching, studying, and practicing in the wrong way. While we trim the outliers, as a society, maybe we are dooming ourselves to an eternity of mediocrity. As I said, no answers today, just questions to think about…

Switching gears, the thing that surprised me most about the reception my course received was the continued and overwhelming positive response toward the meditative work in the course. This encouraged me to go pretty far down that rabbit hole—I have acquired a home EEG machine and have been monitoring my brain waves while I engage in various meditative and contemplative practices, and have some exciting results to share with you, both theoretical and practical. I will likely extend the “psychological” section of the course, in response to the huge demand for more of this material, and based on some of the research and work I have been doing. I’ll also be writing a bit with some concrete ideas about how you can manage your mental state and attention—critical tasks for any trader and very exciting stuff.

I’m also doing some cutting edge work with human intuition: how to measure it, refine it, train it, and quantify the results, but I am pretty far away from having anything to share at this time. This is perhaps the most powerful stuff I’ve worked with in the last decade, but it is also very tricky to quantify and to really understand what is going on. I may share some musings, but I certainly can’t write on this with any degree of authority.

One thing you might notice is missing: why no more new exciting trading patterns? Why no more ways to think about and analyze the market? Why no new trading systems? I’m asked questions like this in email frequently (and, for those of you waiting on an answer, I had gmail ultra-filter my messages so I have a huge backlog of emails I recently discovered. I’m working on digging out from under the pile, but it’s going to take some time…) The reason is that, at least for me, I think I have quantified what is quantifiable, relevant, and important in markets, and I’ve shared that with you, in the book, in these blog posts, in the course, and in the research I write every day. The more research I do, the more I see the same simple things, and the more respect I gain (if that’s possible) for the degree of random variation and risk in the market. There is no holy grail. Truly. As long as you trade within the general parameters of how markets work, understand basic statistics, understand probability, can manage your emotions, can manage risk and size positions properly, and are sufficiently well capitalized with realistic expectations for returns, you can make money trading. There’s no magic method, system, or approach, and there are no secret methods—there is only you. Work on “you”, and results will follow. I do plan to write some more on market topics, perhaps focusing a bit on options, volatility, and how to do your own work, but these posts will now share the spotlight with some non-market topics.

So, I guess the bottom line is that I will be expanding the focus of this blog a bit. I’m also always open to new ideas and directions from readers, so please feel free to use the contact form here to drop me a note. I won’t necessarily write on every topic someone suggests, but seeing what people are looking at and thinking about can be very helpful to me as a writer, and, who knows, maybe we will find some exciting, unexplored new frontier.