Tuesday, August 05, 2008

Cross-Talk: Trading Coaches as Whores

* You are 5'10" tall and have a vertical leap of less than a foot. You probably shouldn't try to make your living playing basketball.

* Your verbal IQ is quite high; your performance IQ is below average. You probably shouldn't try to make your living as a mechanic.

* You are not particularly visual in your way of processing information and your fine motor coordination is at best average. You probably shouldn't try to make your living as a graphic artist.

All three statements happen to be true of me, and I suspect the conclusions are not especially controversial. Truth be told, I'd make a rotten pro basketball player, mechanic, or artist. I accept those things and focus my energies in areas of strength.

Suppose, however, we take a new set of statements:

* You don't like taking risks and you're not especially disciplined in your work and lifestyle. You probably shouldn't be a trader in the financial markets.

Well, you've just touched the third rail of coaching. To even intimate the above is to incur the wrath of every losing trader who seeks advice that would justify a continuation of his ruinous path. It reminds me of couples I used to see in counseling who hated each other, made life miserable for each other, put their children through the agony of a loveless home, but who wanted help to "work on our marriage" because they didn't want to separate. Lord help you if you ever intimated that perhaps--just perhaps--they weren't cut out for each other. They could feel justified staying in the marriage as long as they were "working on it". Take away that prop and they hated you for making them face unpleasant realities.

Those situations turn counselors into enablers. Just like coaches are enablers for those who shouldn't be trading, fail to support themselves and their families, and pour their last, desperate hopes into the assurance: "I'm working on it." Maybe there's a way to make a living as a coach for the trading public without being a whore. I doubt it. It's why I steer clear of that part of the business; why I never went into the private practice of counseling and therapy. Too often, you're taking money to prop people's illusions, not to make a real difference.

Hats off to Dr. Bruce Hong for being willing to touch that third rail and open a discussion of who shouldn't be trading. Bottom line from my end: give trading a year or two, track results diligently, work daily on your skills, absorb as many resources as you can, and then see at the end of that time if you can at least cover your costs and break even. If not, consider that your greatest skills might lie elsewhere. I respect Michael Jordan for trying his hand at baseball and giving it all he could. I respect him even more for deciding to stick with his greatest strength and return to basketball.

The only real failure is to spend your life doing things you're not meant to be doing.
.

9 comments:

Firebird said...

Dear Dr. Steenbarger,

Not to kiss your butt or anything, but you're really inspired lately. Has something changed? Are you taking testosterone (just kidding :D)?

Regarding trading coaches, I think they should just advise failing traders to quit trading and start a coaching practice... wait... duh...

Looking forward to your new book, best trading,

Jorge

markus said...

A great post indeed!

Cheers,
Markus

Autore del blog said...

This is refreshingly honest on your behalf -- most theraphist to try to addict clients to their servics without really helping.

Even worse are some psychologists turned market gurus that use chaos theory and other complex concepts to generate admiration and sales..

best regards,
alex

insidertrades.blogspot.com

Mark Wolfinger said...

The bitter truth is difficult to swallow. Well done!

I quoted a portion of this post in my blog today: http://blog.mdwoptions.com/options_for_rookies/2008/08/how-do-you-know.html

tradingadviceblog.com said...

You've got to love the way that academics like to label people to fit their theories.

Most of us have varying degrees of all of these traits - and to give the sense that they are inherent and irreversible is a bit misleading.

A significant number of the most successful traders crashed and burned in a big way when they started out - they faced many of the issues sited in this post.

However the thing that seperated them from the crowd is that they had a burning desire to change and they put forth the self effort to do that - particularly in the area of mental strategies. They retrained themselves to think differently in terms of risk, probabilities etc and they learned ways to work with their emotions.

Thats the beauty of the freedom of choice - each of us is free to shoot for the moon, regardless of how we may be labelled by the establishment. Many will fail because they don't have the aptitude and don't make the effort, but some who want it bad enough, and work hard enough will get there.

Are trading coaches so different from any other type of teacher? How many violin teachers have had their ears brutalized by the screeching sound of some young kid who never had a hope of being a great violinist - and yet they keep teaching because it is their chosen profession and once in a blue moon a student comes along that is hungry to learn, that does have some basic talent and it makes it all worthwhile.

Firebird said...

Hi TAB,

Of course most of us (and the general population) have varying degrees of some of these traits, but it's the degree that counts. Having a beer on weekends wouldn't disqualify you to trade - getting pissed every time you suffer losses would. Being lazy about housekeeping (ahem) or menial chores wouldn't make you unfit to trade - being lazy about your research would, etc.

I'm all for burning desire, I'm all for nurture vs nature, I'm all for shooting for the moon and to hell with the establishment, however... I'm a lousy musician, I have no ear, no rhythm... does that mean I should not attempt to play the saxophone? Of course not (even though my kind neighbors would disagree), it simply means that if after several years practicing and taking classes, I still quite don't get it right it would not be realistic for me to quit my day job and insist on becoming a professional world-class saxophonist just because I am so determined/stubborn that I will accept neither defeat nor reality. It also means that it would not be ethical for anyone to take money from me by taking advantage of that denial of reality.

Violin teachers keep teaching because a) it is their profession, b) (hopefully) they love teaching. However, violin teachers a) don't charge their students thousands of dollars, b) don't tell their students that all that separates them from riches and fame is working (with them, of course) on their emotions and last but not least, violin teachers are skilled violin players and will teach (partly) by example (how many trading coaches will let you see them trade?).

I have no problem with reputed and experienced trading coaches, violin professors, etc. that charge high sums to successful traders and violinists who could use a hand to take their performance to a higher level. It's the eeches that prey on the unknowing, naive and/or dysfunctional that disgust me.

Finally, as a certified teacher, yes, when out of a hundred students you have 99 that don't give a crap and one that shows interest and progress that makes it all worthwhile for both student and teacher. However, when you have a hundred students that are giving it their best and only a tiny minority live up to (theirs or their parent's) unrealistic expectations, it is a heartbreaking experience - unless of course, you're charging $5,000 a piece... that would make it worthwhile...?

Best trading,

Jorge

PS: as a side note, I think that the original post was disrespectful of whores.

tradingadviceblog.com said...

Jorge,

Everything you say is spot on, and I totally agree that if a trading coach continues to accept a client's money after a period of trying, knowing full well that the client doesn't stand a chance then its unfair to the client to mislead them.

However, having said that, most coaches focus on the area of trading mindset. And most failing traders have steadfastly avoided addressing their mindset - while focusing exclusively on their trading system/method - and hence have failed repeatedly.

So when a trader that has repeatedly failed comes to a trading coach, it would be equally unfair to write them off as a hopeless case without first working on thinking strategies - which can be learned, and which can have a dramatic effect on an otherwise unsuccessful trader.

And yes for sure, if after a number of sessions the client is still not showing any signs of improvement then it does make sense to suggest that they invest their time, money and effort in another direction.

Firebird said...

Hi TAB,

I agree. Please notice, however...

From the original post:

[i]"Suppose, however, we take a new set of statements:

* You don't like taking risks and you're not especially disciplined in your work and lifestyle. You probably shouldn't be a trader in the financial markets.

Well, you've just touched the third rail of coaching. To even intimate the above is to incur the wrath of every losing trader who seeks advice that would justify a continuation of his ruinous path."[/i]

Dr. Steenbarger is a trading coach; he's writing a coaching book. Nobody here is saying that coaching has no value or that psychology or the mindset don't play an essential role in trading.

However, a) not everybody can make a living trading, just as not everybody can make a living as an athlete or as an artist b) the vast majority of traders who have "failed repeatedly" have first and foremost technical failures (lack of and edge, poor understanding of the market, etc.) that only compound their mindset problems, as in for instance the previous post on trauma and drama. If you're 5'6" and weight 300 pounds, all the visualization techniques in the world won't make you run a 2 hour marathon until you cut down on the burgers, chocolate chips,etc. Similarly, if you're risking 5% of your equity per trade, the solution lies not in mastering your emotions as your account goes in a wild roller coaster, but simply in cutting down your risk to 2% or less. Will any sport psychologist not tell the overweight gentleman that before he hires his services as preparation for the Olympics he should shed some weight and then go see him again? How many coaching traders would tell the 5% trader to cut down dramatically on size and then, if need be, contact them again? So far, I would only count on two.

Best trading,

Jorge

PS: Sorry for "hijacking" this post, doc

Brett Steenbarger, Ph.D. said...

Thanks, Jorge; no hormonal basis for the inspiration--and my sincere apologies to practitioners of the world's oldest occupation!

Brett