Importance of Trading Skill Development
In search of the secrets of traders’ success, we discussed the importance of focus on Deliberate Practice by professionals under a coaching system for proper trading skill development. Why do so many aspiring traders think they can master the knowledge of trading themselves without a need for mentors? What are other additional undisclosed elements of success that allow forex and futures traders to become consistently profitable over a long period of time?
In this video, we discuss the importance of the three domains of knowledge and its impact on the attitude of traders to master the essential fundamentals for trading skill development.
What are the Three Domains of Knowledge?
Most aspiring traders do not know about the existence of the three domains of knowledge and the importance it has to properly master trading skills. The three domains of knowledge are fundamental in understanding the proper knowledge of trading and to save time in learning basic trading skill development.
These three domains are:
- Content knowledge
- Process knowledge
- Conditional knowledge
What is Content Knowledge?
All aspiring traders are familiar with content knowledge, which is what they mainly learned in school.
- Content knowledge refers to the facts, concepts, theories, and principles that are learned in specific academic courses
- The contents are fixed and do not change over time
- It is used for many years exactly as it was learnt at the beginning
- In the content knowledge of trading, some examples are the concepts of beta coefficient, bid-ask spread, and buy to cover
The Learning Curve of Content Knowledge:
The following are the characteristics of the learning curve of content knowledge:
- Fast and can be mastered in a short period of time
- Can be self comprehended and studied in many cases
- Does not require much practice
- Can quickly achieve a permanent positive outcome
What is Process Knowledge?
- Process knowledge represents the workflow within a complex system and how various parts interact to get the job done
- Acquiring the trading skill development needed to understand and execute a complex trading system requires knowledge of the process
- For a smooth operation, similar to driving a car or flying an airplane, a trader needs to master the sequence of the process by practicing with a coach or mentor
The Learning Curve of Process Knowledge:
The following are the characteristics of the learning curve of process knowledge:
- Slower than content knowledge’s learning curve, requiring more hours to master
- Hard to be self-taught and the help of a coach’s assistance who is familiar with the process can speed it up
- Requires more practice and repetition to master
- Can gradually achieve a positive outcome and constant practice is required to maintain it
What is Conditional Knowledge?
- Conditional knowledge is a smart decision-making algorithm, which defines when to use and when not to use a procedure, step, or strategy
- One needs to master when and why a procedure, step, or strategy works under certain conditions
- One needs to master when and why a certain procedure/step/strategy works better than another
- Conditional knowledge is used in many types of trading and is defined in a trading plan
The Learning Curve of Conditional Knowledge:
The following are the characteristics of the learning curve of conditional knowledge:
- Slowest of all the learning curves and step-wise, requiring much more time to master within a trading plan
- Very hard to be self-taught and a smart coaching system is required to mimic different conditions in order to master all possible variations for optimal trading skill development
- Requires extensive practical drills and repetitions to master the best decision-making under pressure
- Can slowly achieve a positive outcome with delayed profits, and requires regular coaching to maintain a competitive advantage
How is the Learning Attitude of Professionals Affected by the Awareness of the Domains of Knowledge?
Understanding the various domains of knowledge and the time required for mastery creates a different mindset towards training as summarized below:
- Professionals understand the value of process and conditional knowledge understand that “knowing does not equal doing”
- Professionals turn knowledge to highly applicable skills by using deliberate practice daily, while they establish strong relationships with best mentors and coaches
- Professionals know developing these skills is time-consuming, and are patient and resilient during the challenging training process
- Professionals know progress is step-wise and gradual, so they expect delayed rewards and plan for long-term outcome
A professional-minded person exerts a more patient, resilient, humble, and coach-able attitude toward developing trading skills.
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To Master Trading, Professionals Know the Importance of Content and Process Knowledge:
One of the secrets of successful forex traders, along with traders of all other financial markets, is that they know the importance of developing their content and process knowledge while developing their trading skills. Professionals develop their practical skills in a safe environment by using Deliberate Practice Drills under a Learning Management System (LMS), which will be discussed in detail in the next blog post "Winning Trading System".
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