The Trading Brain

thetradingbrainThe Trading Brain

The brain of an elite trader is different. Whether it’s picking up a on bearish tick divergence and having the wherewithal to flip from long to short or spotting a tradable pattern across a basket of in-play stocks, elite traders have to be experts at taking in visual information, processing that information into manageable “chunks”, and then making rapid and precise high-speed decisions. Below are just a few of the cognitive skills that high-level trading demands:

High-Speed Decision Making:

Traders, especially intraday traders, don’t have time to think deliberately. They have to react and make precise, high-speed decisions based on pattern recognition and a keen instinct honed by practice.
Long or short? Take it at the bid or the offer? Traders have to make these types of decisions before they even know they are thinking about it, because conscious thought is too slow.
Right now, traders build these skills through practice time and market experience. There are also ways to build this high-speed decision making ability off the field or market hours, through brain training, to get experience without taxing your PnL. The Trading Edge is dedicated to exploring the training tools and methods that will speed up this learning process and accelerate the acquisition of trading expertise.

Emotional Regulation:

The importance of emotional regulation in trading performance can’t be underestimated. Performing in the zone is all about leaving the last bad trade behind and tuning out the pressure, nerves, noise, and distractions of the moment. But the ability to perform under pressure isn’t something a trader is either born with or not. It’s a skill, one that can be honed through practice and habit.

Pattern Recognition:
“History doesn’t repeat itself, but it does rhyme.”  ~ Mark Twain

Whether we’re talking about a trader who trades off of the fundamentals or a technical technical who trades off of market indicators and patterns.
One thing is for sure and that is that the market moves in discernable patterns.  Whether those patterns are the result of mass human psychology or the abstract human mind looking to create order out of jumble, better understanding and improving pattern recognition is key for all traders.
Elite traders differ in they that are able to see, process and understand what’s going on now, and what’s going to happen next with surprising accuracy.
For the pattern based traders there is a name for this skill: spatial reasoning. It is the ability to understand scenes in three-dimensions and it is essential to technical trading.  We will explore topics and techniques that can improve our pattern recognition through improvements around working memory, processing and perceptual speed.

Visualization and Imagination:

Mental rehearsal and visualization has consistently been found to enhance performance in stressful conditions, and has been a cornerstone of many successful traders.  But recent research indicates that the the brain’s power to imagine and visualize may even be utilized as a tool to enhance and solidify the gains made in training.  Furthermore visualization can be used to actualize that practiced mindset and confidence in times of stress or when it is called upon.

Reaction and Anticipation:
The best traders don’t necessarily have better eyes than their competition. Traders who seem a step ahead are actually experts at picking up visual cues that help them anticipate and react to the market. They don’t see any more, or any better, they simply do more with the information that they receive.
A classic example of the way that vision is misunderstood comes from baseball. It is often said that great hitters can see the seams on a curveball as it travels toward the plate. But by the time a hitter can see the spin on a pitch, it’s too late, they have already made up their mind about whether to swing or not. Expert hitters can guess the pitch type without even seeing the ball leave the pitcher’s hand, and can read the pitch location after just a few feet of flight.
In contrast, traders need to train to recognize and react to patterns based upon historical experience but also be capable of tuning in or tuning out additional present peripheral inputs.

Focus and Concentration 
Focus, or a state of relaxed concentration, is also something that can be seen with brain imaging techniques.  In sports, clutch free throw shooters and golfers have quiet brains; they really are calmer. You can measure and see the way that elite performers’ brains behave differently from those who buckle under the pressure. Having a quiet brain allows highly trained skills to be executed automatically in situations where conscious thought would otherwise get in the way.
At The Trading Edge we will explore lifestyle, habits, and products like neurofeedback, that will be able to help traders attain an optimal trading brain state.

The Trading Brain

by editor time to read: 3 min
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