While reading the book Ultralearning by Scott Young, I picked up some interesting insights on better ways to approach learning. But first, what is “ultralearning”?
Scott Young writes “ultralearning is a strategy for aggressive, self-directed learning. Self-directed means that, rather than waiting to pay for expensive tuition and tutors, you can take back control. Aggressive means that, instead of spending years at something without getting great, your limited time and effort are always directed towards what works.”
You may be just starting your trading journey, and the idea of spending years getting your financial education can seem daunting. Or, you’ve been doing this for some years and feel that you just aren’t retaining some of the lessons and keep making the same mistakes.
Ultralearning is not meant for everyone or for every task, but I noticed some concepts that are applicable to the process of learning trading at a high level. Perhaps you can use them in your own study to become a better trader faster.
Ultralearners Don’t Rely on Talent
When people try to learn a new skill, Young argues that it’s more about applying the right methods of learning than being blessed with any unique talent or genetic advantage. This is in line with the philosophy of Robert Greene – mastery of anything, including trading, is more correlated with hours invested in devoted practice than perhaps anything else.
Are you here to achieve trading mastery? Mastery usually takes at least a few thousand hours. You don’t want to spend that much time learning something the wrong way, do you?
Metalearning: Learn How to Learn
Before diving into a subject, spend time understanding the best way to learn it. Research the subject, identify the key skills or concepts, and determine the best resources and strategies. Ask questions like:
- What should I learn?
- Why am I learning this?
- How should I approach learning this?
I’ve noticed that traders often don’t know why they are learning a specific strategy or trading a specific market. Everyone gets into trading to make money, sure, but think beyond the money. Why this particular methodology? What is it about your strategy that makes sense to you as an individual, with your unique personality and tendencies? Do you even know what your trading personality is yet? If not, it’s time to take a step back and address some of these questions before going further down the wrong path.
Young argues that we should take up to 10% of our learning time (this number decreases as our learning time gets into the hundreds of hours) to research what we are supposed to learn, before actually learning it. This tends to save time over the long run, as we eliminate the prospect of learning things we don’t need to know.
Using Intuition: Go DEEP
Another issue I observe frequently in other traders is that they settle for the bare minimum with trading strategies. They often find something that sort of works, sometimes, and just try to milk this for easy profits.
This sort of approach, while it may be profitable for a short time, does little to develop your skills as a trader. Young argues that understanding the “why” behind concepts, rather than just memorizing facts or formulas, is an important part of the learning process. Deep understanding leads to better intuition and problem-solving skills. So how do we apply this to trading?
One of the most important elements I routinely apply is the categorization of market contexts. Imagine that you have a 5-minute time frame setup which works beautifully on Monday at 9:00 AM, and then fails on Thursday at 8:00 AM. Most beginner traders will assume this is simply the nature of trading, due to probability and statistics. In reality, they simply didn’t have enough information about the market on Thursday (and perhaps not on Monday either), which could have been used to make a better decision.
When you learn a setup, don’t just memorize the basics about the setup and try to apply it over and over. Try to understand why this setup came about at that time, and what else may have contributed to it working. Then, when the same setup fails in the future, spend some time to understand why it failed.
Look at the context in each situation – was this a setup that relied on a 1-Hour uptrend last time? Perhaps this time, the 1-Hour chart is on a downtrend, and so the setup didn’t have enough underlying strength to take off the way you expected.
Or maybe Monday was actually a 1-Hour setup based on a news-related move from Friday, which you had neglected to take note of. Thursday, on the other hand, may not have had any larger underlying move in progress when the 5-minute setup came.
Directness: Learn by Doing
Practicing the skill directly in the way you intend to use it is the best way to learn. For example, if you want to learn a language, spend time speaking and conversing rather than only studying grammar.
When it comes to trading, studying general chart patterns, price action, and other concepts of market behavior is important. Demo trading is a step above this, because it involves live market data. But nothing will be an effective substitute for the hours of practicing and taking real trades, on a live account. I recommend trading small position sizes on a personal account if you are not able to take demo trading seriously.
If you can’t afford to trade futures on a live account, there are some great alternatives now in the form of prop firms. If you can pass an evaluation and show that you are profitable, these companies allow you to trade and earn money with capital that they provide.
But even if you aren’t quite there yet, I’ve found these firms to be an extraordinary tool for practice. There’s no penalty for failing an evaluation, and you can repeat them as many times as you want. It’s something worth considering if you are looking for the pressure of live trading without having to eat the losses.
Feedback
You probably already know that feedback is important in learning. Feedback is how you (hopefully) figure out what’s going wrong with your process, in whatever you’re trying to learn.
But there are different kinds of feedback available, and not all are equal in usefulness.
Young talks about Outcome Feedback, Informational Feedback, and Constructional Feedback. Let’s take a look at the differences.
Outcome Feedback
If you’re a stand-up comedian, you get Outcome Feedback from the audience about your jokes. When you’re practicing an instrument, you get Outcome Feedback from the sounds being made, about whether or not you are hitting the right notes or using the right technique.
But in cases like these, all you’re getting is a bit of information that tells you you’re not quite hitting the mark. That’s about it. The audience doesn’t tell you exactly what’s wrong with your jokes, and an instrument doesn’t tell you exactly what your mistake was while playing it.
In trading, the market is good at giving you Outcome Feedback about whether your trade idea was good or not. When the market moves against you dramatically or stops you out, you know you made a mistake. But this is not enough to find success as a discretionary trader.
Informational Feedback
Informational Feedback is a step up from Outcome Feedback. In this case, you get some information about what you are doing wrong.
For example, if you are speaking a foreign language and the listener shows you a confused expression, you can make an educated guess that you are using the wrong word or pronunciation of your word, because they don’t recognize it. If you’re a comedian and you notice the audience is bored, it tells you that this particular joke needs to be more captivating.
However, you’re still not learning how to bring about these changes. You now have information about what went wrong, but it’s not enough.
In trading, informational feedback is hard to come by on your own. To find it, you will often have to backtest your strategy over hundreds or thousands of instances, and try to locate a pattern. Without a background in programming or good pattern recognition, you may be stuck at this step. Is your issue more about using the wrong size of stop, or are you chasing trades in the wrong market context?
Constructive Feedback
Constructive Feedback is the highest form of feedback, and is typically only available through a teacher or mentor. With constructive feedback, you get information about what you are doing wrong, as well as what you can do to fix it.
As a comedian or artist, this may mean working with a coach on your delivery, your pacing, or other aspects of your performance that typically have more nuance than “is this joke funny or not?”
If you’re playing an instrument, maybe you are applying the right pressure but using the wrong technique. Again, a teacher would be more useful here than simply listening with your ears or expecting a casual listener to detect the problem.
“The best feedback is informative and usable by the student(s) who receive it. Optimal feedback indicates the difference between the current state and the desired learning state AND helps students to take a step to improve their learning.”
In trading, however, this can only be found from an experienced mentor, and even then it can be a bit confusing. You may know that you need a lot of repetition in order to learn certain concepts in trading, but I’ve recommended on this blog to trade only once per day during an evaluation, and even for most day trading in general.
A good mentor or teacher can advise you on how to correctly navigate conflicting advice. You may have backtested your strategy thoroughly, but if something is not working, it could be related to an issue not visible in the backtesting data.
Speed of Feedback Reception
Young shares that the timing of feedback can be important as well. Getting feedback before you have spent some amount of time struggling with a problem can be detrimental to your learning.
One of the things I prefer to do is to assign beginner traders with some tasks that I know they will have to work on for some time, instead of just giving them the answers that I’ve discovered from my own observations. If you’re trying to learn to trade with mastery, you will have no problem doing some assigned homework from your mentor. And if you are really serious, you may even come up with some ways to challenge yourself further.
What if you don’t have a teacher/mentor?
Unfortunately, finding a good quality mentor or coach can be tough, especially considering the variety of trading issues that can plague any individual trader. Is your issue technical? Psychological? Capital-related?
Then, when you’re trying to pick the right mentor, you may not know who to listen to. How can you fix a problem you haven’t identified? Most traders just look to find the most profitable trader and hope that they will mentor them, but this almost never happens.
Instead, try to get in touch with people who actually understand the process and challenges of trading; don’t just go with whoever earned $500,000 from Apex last year. A lot of profitable traders, especially now with the relatively low cost of prop firm accounts, are only there due to luck, and cannot (or won’t) provide meaningful feedback the way a proper mentor would.
What we’re doing at DojiDojo
One of the main goals here at DojiDojo is to build a sense of group accountability and a positive environment for all traders, regardless of their experience level. We understand the obstacles that trading mastery presents, and we know it’s even more difficult doing it alone. We want to be sure that traders can find good feedback here, provided that they are willing to ask good questions and put in the work.
A professional trading coach or psychologist is also an option if you have the means for it and feel that your issues are mostly mental (if you have a good strategy, this is likely the case). But many of us don’t have that option, and so this community was born as an alternative.
Join us on Discord and share some of your trading struggles, and we will show you how you can directly work on these issues.
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