Saturday, May 09, 2009

How We Learn

After last weekend's article, a subscriber wrote an important and thought provoking note on the blog. He indicated that he was unable to learn very well by reading books or watching DVDs and believed the only way he could learn to trade was by actually doing it. I guess the smart alec in me is grateful that this fellow didn't decide to be a pilot, but learning to trade through trading real money may be nearly equally dangerous. What struck me as so important about the posting was that the writer recognized that learning through reading or watching and listening to someone else just did not work well for him. He had learned that he grasps new information most successfully with a hands on approach. I sincerely believe the writer should congratulate himself on understanding where both his strengths and weaknesses lay with regard to learning. Once he achieved that understanding he can embark on a course of education specifically dedicated to his personal learning skills even without putting real cash at risk.

In the seminars I have given and in the coaching sessions I have conducted, it is apparent that each of us learn in different ways. Some may be auditory learners while others are visual and some do best reading a book. Though I probably shouldn't be, I am often amazed at how the "light goes on" for a student when they are first exposed to a chart of price and volume after they had great difficulty in picturing a trend or understanding how they might use Japanese candlesticks to set stops. Most of us seem to learn best using a combination of methods from attending seminars to reading books to watching DVDs to practice trading. Again, most of us seem to have at least an intuitive feel for how we can best study and understand information.

If we really want to commit to becoming better traders, I suspect it is worthwhile for each of us take a little time to focus on how best we learn then formulate a plan by which we can add to our trading knowledge and abilities. If, like our friend, we can only learn by doing, I urgently suggest it not be done by risking real money at first. One can learn a great deal about methods and strategies by paper trading, for example. When we paper trade, we can see how things work and when we might want to enter a position and under what circumstances we might want to exit. We can test strategies and practice adjustments to trades, but we don't have to worry about losing the farm while we practice. Please understand, I advocate paper trading as a way to gain knowledge about trading and about ourselves. It is not the same as trading real money. When we do put real money on the line, our emotions will be much different than they are with a paper trade and at that point we may have reached the point where we have no choice but to learn by actually doing and, perhaps, using a coach to help us through some of the emotionally driven issues we may face when real money is at risk.

If you learn well by reading, you may want to check out "Trade Your Way to Wealth" or my new book, "Smart Investors Money Machine." If you like to learn using videos, you might want to take a look at the DVD that was made of my presentation in Chicago before a live audience for Traders Library that is about to be released. Of course, while I'd love to see you get my books or DVDs, there are a number of great tools available beyond what I have done. Dr. Alexander Elder's "Trading for a Living" is an excellent book for those who want reading material as is Charles Kirkpatrick and Julie Dahlquist's "Technical Analysis." Many brokerages offer free webinars to those who prefer a visual presentation, and seminar companies abound. Trading software companies also often put on presentations and I have found it is quite worthwhile to attend seminars put on at events like Traders Expo.

Most of us can improve only with study and practice. Trading education generally must be self-directed since few institutions yet offer courses and even if they did, I'm not too sure that I'd want a purely academic approach in any event. As has long been my mantra in this area, if you really want to be a good trader I believe commitment to study and practice are essential.

by Bill Kraft, Editor
Copyright 2009, Makin' Hay, Inc.
All Rights Reserved

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To comment on Bill's article click on the "comments" link below.


Manish Chauhan said...

That was an excellent post .

Even I have realised that I did not learn much by reading and listening to videos .

Yes, they help , but they will not make you a trader . Its you only who have to self discover the path for your self .


Anonymous said...

Hello Bill,

Congratulations on writing/publishing your new book "Smart Investors Money Machine."

I have been a training and development professional for over 20 years. There is a standard formula that works, which goes like this: Tell them information, show them information, Have them practice the information.

I developed a trading approach called Triquetra Trading Technique. Which includes a Guide (tell portion) and a video (show portion). And I always encourage people to do paper trading (practice portion) until they gain confidence in the technique.

Congratulations again bill

PP ARGU said...

My full congratulations for your clear and honest exposition.
I am another one that prefers learning with real trading. I started doing it in the Forex Market's Demos. Real money will come in near future. Hopefully I am not in a hurry looking for money to live.
May be is because my age. I am 61 and I am not in the time of live for starting another career like when I was a student.
Trading is thrilling and a good way to get extra incomes. In future it can be my retirement hobby anywhere I decide to live in the world.
May you please clarify if your books are able to be found in in Spanish? I am fluent in English but to play with money better to be able working with my mother's language.
Best - Pepe - SPAIN - EUROPE

Morris said...

Hi Bill over the last bear market I have lost alot of money , mostly by averaging down.This was working for me prior to 2008 in the bull run.Before this bear market I was mostly learning by trading.It has been very costly. Since reading you 1st book,it finally sunk in averaging down is a losers game , I have to have a stop in place before the trade is opened and stick to it.This simple statagey can save many traders from ruin.Reading and learning first can definitely save you big dollars

Bill Kraft, said...

Thank you Manish. I appreciate it.
Bill Kraft

Bill Kraft, said...

Thank you, DrQuien. I agree with your approach and have been applying it for a number of years with my own seminar and coaching students as well. I appreciate your thoughts.
Bill Kraft

Bill Kraft, said...

Pepe, thank you for writing. I am not sure whether the books are available in Spanish or not, but I am forwarding a copy of your note to my publisher, John Wiley and Sons, and will provide the answer as soon as I can.
Bill Kraft

Bill Kraft, said...

Thanks for writing, Morris. Many who have called to inquire about a personal coaching session found themselves in the same boat. I definitely am not a proponent of averaging down. Averaging up with a stop, on the other hand, can be a productive strategy for a bull.
Bill Kraft

Guillermo A Velasco said...

A musician once said: "learn all styles and then create your own". This is the same. DVDs or commentaries are about a stock pick but few clearly support the pick. Writing about techniques and how ideas (picks) are validated, thought process, helps one start and craft owns unique technique, and apply to their own chosen or known industries or niches.

Bill Kraft, said...

Thanks, Guillermo. One of the critical factors in becoming a successful trader as I discuss at length in "Trade Your Way to Wealth" is the creation of a business plan that is specific to each individual trader. The only thing I want to add is that DVDs are not just about a stock pick; they often also deal with the creation of strategies and methods.
Bill Kraft

Unknown said...

As always, a thought-provoking article; I look fwd to receiving it each week.
A question: In your new book (excellent by the way!!!) in the section on LEAPS, you talk abt the option's Delta. I currently subscribe to an investment/trading sight that provides the Greeks; however, I am probably going to discontinue the subscription when it expires. Is there a free website that offers the Greeks. I checked Yahoo and Moneycentral and Marketwatch to no avail. Suggestions/

Again, a thousand thanks for your educational efforts. They are appreciated.

Macon, GA

Bill Kraft, said...

Thank you, Richard. Greeks, including the delta, are often available on brokerage sites such as so you might check your brokerage account if you have one open. I also believe you can find them on the CBOE's excellent website, I genuinely appreciate your kind words about my new book. I hope it is helpful and that you find some ways to add streams of income that fit your needs and lifestyle.
Bill Kraft