Career Development in General

Most professions and careers develop along the same lines.
1) The introductory learning phase introduces the basic definitions of the field. These are the college years or the trade school. MD's are in medical school.

2) In the apprentice phase the trainee applies "school" knowledge. Ones first job. MD's are doing their internships and residencies.

3) The apprentice grows into a professional. One "learns the business": The field starts to come into focus. An MD is finishing up residency or beginning a specialty.

4) Now a professional, the individual "learns the tricks of the trade". Synthesis is starting to occur; reality and theory are melding. Sometimes it is back to the books, maybe for an MBA. The MD is in practice.

5) The practitioner has mastered the field and can innovate new developments. The MD is now a noted contributor, a teacher.

Career Development for Traders

How it is now:
1) The new trader seeks books and magazine articles, attempting to build a knowledge base. This is frustrating. Every place one turns, there is different advice. Buys a trading model.

HOW IT SHOULD BE:
1) The trader-to-be should study Auction Market Theory. Learn the basics of markets, how they work. Available at the CISCO website under "Whats New". Also in Stocks & Commodities, June/July 2002.

How it is now:
2) Apprenticeship often begins with starting trading, usually with disasterous results. That trading model did not work. The trader is trying to do in his field what it took the MD four years of medical school and at least a year of internship. Looks at other trading models. Goes to an expensive two or three day trading seminar.

HOW IT SHOULD BE:
2) Auction Market Theory apprenticeship starts via "paper" trading. CISCO's Short Course is an organized introduction to the field-- market principles are developed into 'reference points', elements of market information tied to value and demand. Basic training model defines balanced/unbalanced market types, the first important reference point. Market behavior is learned via paper trading. The budding trader learns how to evaluate value, risk and opportunity. Survival (risk control) is the key concept.

How it is now:
3) The few survivors have developed a healthy skepticism of the claims bandied about in the literature. They combine techniques of reading markets; joining chart reading with technical analysis and a 'feel' for market behavior (Brett Steenbarger's pattern recognition). Judgement develops on the basis of experience.

HOW IT SHOULD BE:
3) Entry into trading the real world. Techniques and strategies found in phase 2) are put into action. Strategy comes from understanding and analyzing a market. One's own trading model is a result of this knowledge. Feedback from real-world trading is synthesized with Auction Market Theory. Trading techniques are honed.

How it is now:
4) Some interchange occurs with other successful traders, but for the most part a trader with a successful method will not share the details. No professional level Journal or reporting structure exists for traders. A few traders will maintain professional growth internally and become masters. Unlike the MD, there is virtually no general knowledge base for support. Of course, the trader has developed survival skills: do not listen to brokers, do not run with the pack, do not overtrade and such like.

HOW IT SHOULD BE:
4) The trader goes beyond the basic principles. New trading concepts are generated and tested. One's personal experience is factored in. Trading risk is reduced. Trading opportunity expands. Skills are sharpened.

How it is now:
5) The master is normally quite busy in keeping up with market change. Unlike the MD, who builds on past knowledge and discoveries (both his and those of others), the master trader is on his own, sink or swim, as the market evolves. Contemporaries are few. Most of the advertised trainers are not masters, but rather hacks who capitalize on the widespread lack of market understanding.

HOW IT SHOULD BE:
5) As a master in the field, the trader has many options. One direction is to expand the business, trading for others. This could involve mentoring staff members. Or one could change the goals--seeking fewer trades with bigger opportunity, with less time in the market. The master is in control.

How Can a Trader Act Intelligently?

You are on the CISCO website. For no cost except your time you can learn a whole lot about markets. How they are organized, how to know their current condition and how to use value change as trading information.

How markets are organized
When a market experiences a pulse, say a short term price rise of several ticks, everyone at the end of a quote machine (all traders) sees that move. Not everyone agrees on what the pulse means. One buys, one sells, another waits for a while and then acts, and so on. What the market sees in return is the feedback to that action. Markets regulate themselves by feedback. A day's trading is a continuous set of pulses and feedback responses. By the end of the day it is apparent that the highest and lowest prices had very low volumes (the old Russian proverb is proved over and over: there are two fools in the market; one asks too much, one asks too little). In between the high and low, there is a lot of trading at the middle prices. A chart of volume versus price gives a bell shaped curve. This concept is thoroughly described in the article on Profiles. The Profile gives near term support and resistance, called the 'value area'.
Market/Meta Profiles Background


What is the Market 'Condition'
A market is either in a stable, 'balanced' condition, or it is 'directional'. The stable market gives the bell shaped distribution described above. The nice bell shape means most traders agree on value, the fat part of the curve. A directional market has a strung-out distribution in the direction of the trend. These are the situations that makes for profitable trades. But a one-day reading of a market is often not enough to get a realistic support and resistance reading. You need to look at a longer term, say several days of Profiles put together. This is the 'Overlay Demand Curve' and it also gives you a support/resistance reading for balanced markets.
Overlay Demand Curve Background

Value Change as Trading Information
Let us see what we have. The Profile gave us a near term support and resistance pair. Imagine that resistance is at a price of 1008 and support is at 1002. The Overlay naturally has a wider support/resistance range since a longer time is involved. Imagine the Overlay resistance is at 1015 and support is 1000. It looks like this:

        
          1015         Overlay Upper Limit
                 1008      Value Area Upper

                 1002      Value Area Lower
          1000         Overlay Lower Limit