In our smallest office in our downtown Manhattan digs I was an actor in this conversation.

“We make trading too hard,” said the new, gregarious trader.

“I am not sure what you mean.  Trading is about learning set ups and then mastering the fifteen subsets of each play,” I replied.

“See that is where I think I go wrong.  I think trading is that easy.  Just find the set up and then make the trade.”

“But what about when you are 1 1/2 points in the money, you see change on the tape and the stock comes all the way back to your start price and you are kicking yourself for not exiting when the tape changed?  What about when you get shaken out but then the stock offers you a chance to reenter before it explodes?  What about the set up that is not worth that much size trades against you but is not a bid deal because your loss was nominal?  What about that same set up where everything lines up and you should size up? ”

And on and on I went with the different subsets of a set up that automatically illuminated in my mind.

Trader training is inverted.  Most training is built around writing, lecturing and videos of people waxing poetic about trading that talk at you.  There is new data that suggests some entertaining educational videos watched by young children do not help their cognitive development.  There is no struggle in their learning, which is how your grow.  Most training programs feed you knowledge like a buffet at a Vegas casino.  The training goes something like this….If you just learn these simple charting set ups you will become successful.  This is unlike any other performance field.  Elite athletes, musicians, artists become great by obtaining knowledge, sustaining the energy to practice their craft, and building skill.  Watching a video is not sufficient.  Learning a charting set up is not sufficient.

The failure rate in prop trading is way too high. Why? Partly because of insufficient training.  Specifically there is no skill building and way too much emphasis on knowledge.  Let’s say you learn an intraday trading pattern.  Awesome!  Good for you!  Now you have to practice and practice and practice trading this pattern so you develop the skill to make solid risk/reward decisions in real time.  When Peyton Manning was preparing for the Super Bowl and found a play that would work against the Saints, do you think that was the entirety of his practice?  Or do you think he then went out and practiced and practiced and practiced this play with his offense against a defense?

Simulation is a terrific way to build skill.  Let’s say that you trade a particular trading patten in real time.  That is one experience.  Keep detailed notes in a trading journal about this trade and now that is two experiences.  Watch video of the trade you made…. now three experiences.  Watch video in a group setting with experienced  mentors…and four.  Talk about this set up with others on your desk…and five.  Think about this set up after work….and six.  Visualize the best way to trade this set up…and seven.  Work on a simulator to retrade this set up……and eight and nine and ten.  You can turn one trading day into ten plus.  And this is how you build skill.

Enjoy your weekend.