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How to Become a Top Trader Interview with Brett N. Steenbarger-Part 2

Posted May 10th, 2011 at 08:50 PM by runsan123
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Copyright (c) 2007 Alvaro Fernandez

We covered much ground on Part 1 of our interview with Brett N. Steenbarger. This is Part 2, and last. Brett N. Steenbarger, Ph.D., is an active trader for over 30 years and author of The Psychology of Trading: Tools and Techniques for Minding the Markets and the new Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology.<a href="">kobe bryant shoes</a>

We ended Part 1 of the interview with this quote by Dr. Steenbarger on the Role of mentors and coaches: In many performance fields, such as music and tennis, coaches help students break down their performance into component skills and then systematically work on these and combine them. The mentor is someone who can structure the learning process for the developing performer and help them move along the path from being a novice to being competent to being expert.
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Alvaro: interesting analogy. Who would be a good "trader coach" and where does one find one?

Brett: It makes sense to find someone with experience directly relevant to what you will be doing. The book contains an appendix with different resources that can help you find educational and mentoring resources. For emotional development, you can coach yourself with practical cognitive and behavioral techniques and build new, positive ways of thinking and behaving. The last two chapters of the book provides readers with self-help manuals for utilizing these techniques.

Alvaro: let's talk about some of the key components of top performance in trading, and what skills traders can develop.

Brett: First, we must differentiate whether we are talking about short-term or long-term traders. For short-term traders, the priority would be the ability to process large amounts of information and quickly see patterns that lead to effective decision-making. They need speed, and good working memory. For long-term traders, analytical skills are paramount.

For both, I would add, knowing how to deal with "the emotional factor" is very important. Many traders get very frustrated when bets don't go the way they expected, and become paralyzed or make non-logical decisions. Becoming tired may lead to losing concentration and making impulsive decisions. But I would stress that there is more to trading success than controlling emotions. It takes talent, skill, and a constant learning process. I would also emphasize that, yes, we can train and get better at many things, but it is equally important to ensure an optimal fit between our trading talents and interests: the markets we trade and the ways we trade them. There has to be a fit between what we're good at and the opportunities afforded by a particular market and trading style.

Programs: now and in the future

Alvaro: let's now talk about the tools you mentioned earlier. What training programs are available now and which ones can you foresee will be available in the future?

Brett: First, I find that Dr. Elkhonon Goldberg's metaphor of a gymnasium for the brain is very appealing. We will be seeing more and more tools for cognitive and brain fitness. Dr. Goldberg cites considerable research that indicates we can improve the functioning of our frontal cortex - home of our executive functions such as our reasoning, planning, judgment, analysis, and problem-solving -, through structured exercises, much as we can build our muscles in the gym.

Today, traders have very realistic simulation programs that can help them identify market patterns and improve decision-making. True, as Professor Gopher said in your interview with him, what matters is the cognitive fidelity of those simulations, and how they will help traders see new, non-historical, patterns. But, at the very least, existing simulation packages help traders learn very quickly how to identify a wealth of recurring patterns in markets.

Finally, I work with many traders on their emotional reactions-especially new traders. Behavioral techniques can be very helpful to develop calmer, open-mind, attitudes. You saw my article that stressed the need to keep an open mind"Gorillas in the market"; we need to be aware of and manage the narrowing of our attention that usually follows hyperfocus. For the many people out there who become angry and frustrated after trading losses, I recommend exercises such as deep breathing and visual imagery, which, after a period of practice, can be applied very quickly to our work when we need it. Biofeedback programs that provide real-time visual feedback on the trader's "internal performance" can be great training aids, revealing whether you are in the Zone of optimal learning and performance or becoming stressed, anxious and impulsive"internal performance", revealing whether they are in the Zone of optimal learning and performance or becoming stressed, anxious and impulsive.

It is important to understand the role of emotions: they are not "bad". They are very useful signals. It is important to become aware of them to avoid being engulfed by them, and learn how to manage them.

Alvaro: Prof. Steenbarger, many thanks for your very illuminating comments, both on trading and on improving performance overall. Any parting thoughts for our readers?

Brett: let me go back to the key findings of my new book. One, people who aspire to be top performers in any field must build on what comes naturally to them, in order to be truly motivated and absorbed in constant learning. Two, they will need to structure programs to develop their skills and work these programs diligently. Because elite performers do what comes naturally, they become absorbed in the development of their skills. If you have to motivate yourself to work at something, it's probably not your calling.

Alvaro: Brett, many thanks.

Brett: a pleasure.


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