The author references chess while sharing his thoughts on performance: “A chess student must initially become immersed in the fundamentals in order to have any potential to reach a high level of skill. He or she will learn the principles of endgame, middle game, and opening play. Initially one or two critical themes will be considered at once, but over time the intuition learns to integrate more and more principles in a sense of flow.”
As I look back on the last 20 years of my trading career, I appreciate most the resources that taught me how to think, not what to think.
One of those resources is Josh Waitzkin’s book, The Art of Learning, published in 2007. Waitzkin’s book is primarily autobiographical and philosophical, but also very thought provoking. This isn’t a dry book that lists, say, ’10 steps to learning’ or ‘5 easy ways to master a skill.’
Josh communicates his ideas on learning through his stories. His experiences, studies, and self-analysis are fascinating. While his stories aren’t directly applicable to trading, they translate well. As we all know so well, trading is a physical, mental and emotional endeav-or.
Here is a recap of Josh’s accomplishments: he is an 8-time national chess champion, a 13-time national and 2-time world champion of Tai Chi Chuan Push Hands and a Brazilian Jiu Jitsu black belt. You can access a library of interviews here. Josh is also the subject of the film Searching For Bobby Fisher. Josh is a professional learner and a master of Kaizen—deliberate practice and continuous improvement.
As someone who has observed hundreds of traders, the large number of traders who don’t understand the fundamentals of trading baffles me. Far too many traders operate under the pressure of being undercapitalized. While this is a choice, I believe it goes back to the fundamentals. After all, without a solid foundation, what you build will be unstable. We often see various trading foundations comprised of many factors, including basic market knowledge, that are shaky to say the least. In most cases, this is because traders have spent too much time chasing strategies and tactics versus building a solid foundation built on proven principles and best practices.
This passage from Josh’s book says it all:
“As I struggled for a more precise grasp of my own learning process, I was forced to re-trace my steps and remember what had been internalized and forgotten. In both my chess and martial arts lives, there is a method of study that has been critical to my growth. I sometimes refer to it as the study of numbers to leave numbers, or form to leave form. A basic example of this process, which applies to any discipline, can easily be illustrated through chess: A chess student must initially become immersed in the fundamentals in order to have any potential to reach a high level of skill. He or she will learn the principles of endgame, middle game, and opening play. Initially one or two critical themes will be considered at once, but over time the intuition learns to integrate more and more principles in a sense of flow. Eventually the foundation is so deeply internalized that it is no longer consciously considered, but is lived. This process continuously cycles along as deeper layers of the art are soaked in.”
Using the Market Profile as an example, when I say ‘foundation,’ I’m referring to the accumulation of basic knowledge and understanding of such things as:
The market’s auction process
Value and value area relationships
Price to volume (value) relationships
Acceptance and rejection
Accumulation and distribution
Support and resistance
Balance and imbalance
Market context and tempo
Timeframes and time intervals
Here is are some of the key principles from the first section of Josh’s book:
At some juncture, everything is connected. Consider Josh’s two worlds: chess and martial arts. The former is mental while the latter is physical. Still, there is a significant overlap between the two, and emotional mastery is crucial to both. Josh selectively learned from mentors, which is another example of this interconnectedness. He coupled his selectivity with his own self-discipline to take ownership of what he learned.
He gained more from losing than he did from winning because the experience of failure triggered introspection instead of scorn. His introspection increased his overall performance. Note: Anyone can adopt this skill.
The Soft Zone means being present. In trading, it is easy to become distracted if you’re only looking for one to three high-probability trades per day. Many new traders pull the trigger too late or flat-out miss an opportunity because they are distracted. Be present.
According to Carol Dweck, professor of psychology at Stanford, ‘raising the bar’ is a fundamental principle for peak performers. Additionally, understanding your mindset and its impact on your development is crucial to peak performance. I once heard that rating oneself a ‘10’ in anything is a falsehood because ‘10’ indicates perfection. None of us are perfect. Below is one of my favorite quotes, and I believe it illustrates this concept beautifully:
“I do not try to dance better than anyone else, I only try to dance better than my-self.” -Mikhail Baryshnikov
Josh’s section on foundations covers more than what I’ve noted here. If you pick this book up, I recommend you look deeply into the stories it contains but each story is comprised of a number of principles applicable to trading.
Part 2: Tai Chi Chuan Push Hands
In part one we looked at Josh’s foundational beliefs about learning. Here, in part two we’ll look at his experience in entering the arena of physical contact versus the mental arena of chess.
In 1998, Josh was competing in chess tournaments in Europe. Around that time, he came across the Tao Te Ching of by Lao Tzu. This tome is a philosophical treatise believed to have been penned in the 6th century.
According to Josh, the Tao Lao Tzu was instrumental in helping him critically analyze his relationship with material ambition. Says Mr. Waitzkin, “It helped me figure out what was important apart from what we are told is important.”
Reread that if you will and then consider how it might relate to your own trading as to:
How much time and energy have you invested in determining your trading purpose, core beliefs and principles?
How you critically analyzed your multi-time frame goals?
How you put your own trading process and methodology down on paper?
That is to say, have you externalized it in a permanent medium to facilitate internalization?
Determined to learn more about ancient Chinese philosophy, Josh enrolled in a Tai Chi Chuan class upon returning to the U.S. Tai Chi, based on the Taoist philosophy, is both a meditative discipline and a form of martial arts. The art is focused on the elusive state of ‘being.’ Josh flourished in the Tai Chi Chuan world, quickly mastering the core concept of balance. As I understand it, the meditative aspect consists of breath control, relaxation and physical poise.
There is also a focus on bringing those three elements of breath control, relaxation and physical poise into harmony.
In his book, Josh recounts how his Tai Chi master, William C.C. Chen, moved with grace and poise at age 64. His lessons seemed to transcend the physical movements themselves. Josh said, “(Chen) spoke softly, moved deeply, and taught those who were ready to learn. Gems were afterthoughts, hidden beneath the breath, and you could pick them up or not—he hardly seemed to care. I was amazed how much of his subtle instruction went unnoticed.”
Josh goes on to say, “If I was ready, I would learn. It was amazing how many students would miss such rich movements because they were looking at themselves in the mirror or impatiently checking the time. It took full concentration to pick up on each valuable lesson, so on many levels a Tai Chi class was an exercise in awareness.”
Think back to the last trading course you took. Recall the degree to which you were fully present and attentive. I’ve personally presented or presided over hundreds of courses, and can confirm that the majority of students continually check their smartphones for messages, the latest news, and social media update. This doesn’t mean that the students weren’t listening. Yet, several studies back up the notion that most individuals are inept at multitasking. Plus, the question remains, what are these students missing out on when their attention is split between the course and other things?
A few years ago, I was giving a presentation alongside a very prominent business psychologist and good friend. We were presenting ideas on how to raise performance levels to a diverse group of entrepreneurs and their management teams. During the lunch break, my friend and I went over our objectives for the afternoon session. We both noted that many of the students had been late for the first session. In fact, several of them had been late returning from the AM break, too. My friend the business psychologist asked me to answer a “simple question.” Here it is:
What’s the one thing most people will gladly pay for but be pleased to receive less of?
Taken aback for a few moments, he then added:
“Education,” he said. “Especially in a popular city or resort area.”
Back to Josh’s book. A year after Josh’s initial exposure to Tai Chi, Master Chen invited him to become a student of Tai Chi Push Hands. In Tai Chi Push Hands, the goal is to obtain a postural advantage over an opponent while maintaining your own balance. This is the basis of all martial arts, but in Push Hands, it is refined, stylized and formalized. The objective is not to achieve dominance over another through brute force, but instead through mastery of one’s own energy. According to Josh, the goal is to blend with an opponent’s energy while yielding to it, and then to overcome it with softness.
As the section on Push Hands progresses, Josh recounts the differences between the two Tai Chi disciplines. He notes many lessons that were initially counter to his own nature. They were:
Learning how to yield when being pushed. Learning not to resist.
Learning how to lose in order to win. According to Master Chen, this requires a commitment to put learning and the ability to acknowledge when one is wrong.
Being humble as opposed to being the aggressor. This requires ‘checking the ego at the door.’
Josh recounts how many students were unable or unwilling to internalize these points. When Master Chen would critique them, many of the students immediately explained why they had done what they had done. Josh points out that this is self-righteousness, which reflects a need to be right. It is difficult to learn when the ego feels threatened.
I have only touched on a fraction of the value in this one section of the book. To learn about learning—a most worthwhile pursuit—I recommend you make this book a permanent addition to your trading library.
Part 3: Bringing it All Together
In part one we focused on building a strong foundation upon which to learn anything that interests you. To tie that in with trading, I mentioned a list of topics including the market’s auction process, multiple timeframe synthesis and value relationships. I referenced the work of Carol Dweck on mindsets and the role they play in learning and performance. Part 1 corresponded to the ‘foundation’ section of Waitzkin’s book.
In part 2 we focused on Josh’s process in becoming a Tai Chi Chuan Push Hands World Champion. One of the key references I made was Josh’s statement,
“If I was ready, I would learn.”
In other words, he claimed ownership of his learning process. He recognized that he was responsible for what he learned and how he applied his new found knowledge.
To accomplish this, Josh had to master the ability to internalize instruction that was counter to his own nature. Part 2 corresponded to the section of Josh’s book entitled, ‘My Sec-ond Act.’
Part 3, ‘Bringing it All Together.’ In that section, Josh recounts his experience deep in the Amazon rain forest with his father. His takeaway from that experience: “Being clear-headed, present and cool under fire is a key factor in separating the best performers from the mediocre performers.”
Over the years I have worked with several traders who have difficulty moving beyond re-active ways of thinking to more responsive modes of cognition. In my opinion, when you react, your performance is dictated by the emotions associated with the event. Responsive performance, on the other hand, is about defining appropriate actions ahead of time.
In a later chapter of the book, Josh discusses the concept of performance consistency. According to Waitzkin, performance consistency is a requirement for disciplined practice. Put simply, this is the management of energy versus time.
In a previous post, I talked about Jim Loehr and Tony Schwartz’s book, The Power Of Full Engagement. Jim Loehr is the founder of the Human Performance Institute (formerly LGE Performance Systems) and specializes in the analysis of the performance of sport professionals and business executives. Loehr helps these individuals calibrate their innate abilities for maximum performance. I bring this up because Josh has been a client of LGE.
One of the Jim Loehr’s key findings is that limiting work periods to 90 minutes, followed by a break or recovery period increased the quality of the work overall. In his work with LGE, Josh discovered that his peak chess performance was marked with 2 to 10 minute periods of “crisp thinks.” Conversely, when he performed poorly, he had periods of “deep calculation” that lasted over 20 minutes each. He found that in periods of higher right-left brain synchronization, he agonized less over choices. His periods of “deep calculation” were left-brain dominant.
He found that if he had several left-brain dominant sessions in a row, his ability to process data deteriorated. How might your trading sessions benefit from ‘crisp thinks?’ If you could process data faster, could you not devote the extra time to rest and recovery? Could this increase your performance overall?
The last point I want to touch on in this post is the concept of learning on two fronts. According to Josh, when he was competing for the Tai Chi Chuan push hands world title, he had to contend with ‘dirty players.’ He had two options: allow their behavior to disrupt his performance, or convert the situation into a learning experience. He chose the latter and became a world champion.
Please note that while it may seem an easy or simple thing to make that choice, the environment he was operating in was extremely stressful. Converting it into a learning experience required a great deal of mental discipline.
Another example: Josh was accustomed to training in a certain physical environment. When he arrived in Taiwan, he found that the dimensions of the fighting area were different. Worse, local contenders had been training under those conditions for some time. Again, he could have used his energy to complain about the change, or he could proactively reconfigure his game plan. Again, he chose the latter.
When we trade, we’re always faced with changing conditions. You can react, or you can respond. When you react, know that you are being driven primarily by your emotions. When you respond, you can adapt optimally to the new circumstances. You always have the choice. As a trader, you have three learning environments: the market, your tools, and your behaviors. By periodically reviewing all three and continually increasing your awareness skills, you can pinpoint opportunities for improvement and then plan your steps for advancement.
Again, I suggest you study The Art Of Learning as I’ve barely scratched the surface on the gems it contains.
Until next time . . .