Friday, August 14, 2009

Muscle memory

I’m a member of a wonderful Yahoo group e-mini_traders_anon. Several months back scalperscott wrote that when he stares at charts he’s “trying to create what is sometimes called muscle memory. Muscle memory in martial arts is when there is no thought, your muscles react without a conscious action on your part much like an instinctive response.”

At an elementary level I think this analogy is sound (though in a future blog I’ll invoke Geoff Colvin to add to it), which is why I, who reads and deletes at a speed that might challenge an ADHD teenager, saved his post. But I would offer one minor qualification and one major caveat. The qualification is that muscle memory comes from doing, not just “staring,” a point I’m sure scalperscott would agree with. You can burn a pattern into your brain, but it has to be in your fingers as well. The caveat is more challenging. Most of the time when we’re acquiring muscle memory (especially when it involves more than what the vast majority of people achieve—to walk, for instance) we’re helped along by a teacher. If the teacher is good, we get a solid grounding and master the basics. Then we may be able to practice, practice, practice our way to Carnegie Hall. If, on the other hand, the teacher is middling to bad, what we learn doesn’t give us the foundation for future success. We can practice all we want, but if the fundamentals aren’t in place we’ll never get past amateur status.

In trading, alas, there are no accepted basics. The novice trader doesn’t start with scales and then move up to arpeggios. (It’s obvious I can’t continue the martial arts comparison.) She can’t ease herself into trading the way the John Thompson books eased a child into playing the piano. And since there are no accepted basics (and I don’t count trading truisms such as cut your losses short and let your winners run as basics because they’re incredibly difficult to execute) and no standard paths to mastery in trading, the whole teaching model breaks down.

And that might seem to put the muscle memory analogy at risk when it comes to trading. But let’s go back to the baby learning to walk. He doesn’t have a real teacher, though often he has helpers or cheerleaders. He simply tries to walk, falls, tries again, falls again, eventually walks more than he falls, and finally through lots and lots of practice he walks easily and without thinking about it. This is a process that almost everyone has gone through, presumably without psychological scarring. By the time we get around to trying our hand at trading, however, we are no longer used to all this trial and error, the seemingly endless cycle of failure. We want to be taught mastery one lesson at a time. We want to learn to trade the way we learned to play the piano. We want tiny successes to become larger successes; we don’t want to keep stumbling. This may be one important reason that, although almost everyone can walk and many people can play the piano well, so few are even marginally profitable traders.

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