Experts - Experts Novices and Trading Performance Brett N...

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Experts, Novices, and Trading Performance Brett N. Steenbarger, Ph.D. Note: A version of this article was posted to Trading Markets on 11/7/05 A large body of research examines skilled performance in various fields by comparing experts with novices. These fields range from athletics (both team and individual sports) to chess to various performing arts. Having now read scores of books and research studies on the topic, I see where much of this research could be of value to traders seeking to achieve their own levels of expertise. A book that I am planning for 2006 will chronicle these investigations--and their implications for trading--in considerable detail. This article will focus on one particular finding of interest from studies on expertise in medical diagnosis: the differences in reasoning styles between accomplished professionals and neophytes. Having taught in a medical school for 19 years (and having traded stocks and equity indexes longer than that), I can vouch for the similarities between arriving at medical diagnoses and coming up with trade ideas. Both involve an initial absorption of detail, followed by a comparison of the details with known patterns, and then a sharpening of one's ideas prior to taking action. Traders and physicians alike bring with them mental maps of familiar patterns based upon didactic learning, research, and personal experience. In that sense, a trader's assessment that we are moving higher is not so different from a psychologist's diagnosis of an anxiety disorder. The trader knows what trending markets look like--including certain configurations of price, volume, and volatility--and the therapist has an internal representation of anxiety disorders. Pattern
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Experts - Experts Novices and Trading Performance Brett N...

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