What makes an expert?

Doc Steenberger looks at the question: When it comes to trading, what makes an expert?

Most everyone (not selling you something) agrees that serious investors and traders should be working towards acquiring expertise: This means they have developed and refined the
ability to succeed across a variety of market conditions.

Doc noted a recent study which found  such expertise is rare but, contrary to the efficient market hypothesis, there is a small group of
traders who manage to succeed, year after year.These are expert traders.

What makes an expert? And how can traders develop their own expertise? Three elements:

1) "Measures of general basic capacities do not predict success in a domain"
Experts cannot be distinguished by superior intellects or other cognitive talents.

2) "The superior performance of experts is often very domain specific and transfer outside their narrow area of expertise is surprisingly limited"

Being an expert in one domain does not predict expertise in others; a person can be a highly accomplished trader, but not expert in other areas. Think "niche" — the successful trader has found a particular sphere of success that expresses his skills and interests.

3) "Systematic differences between experts and less proficient individuals nearly always reflect attributes acquired by the experts during their lengthy training"

The expert is one who has undergone a structured, deliberate process of training that builds competencies, offers extensive feedback, and draws upon intensive effort over time to internalize knowledge and skills.

So what might this mean? Here are the good doctor’s conclusions:

1) The majority of traders are looking for expertise in all the wrong places. Learning to trade does not involve finding magic indicators or systems.

2) The vast majority of offerings in trader education are not structured for expertise development.   Seminars, books, Web articles and blogs, weekend courses–all can be useful in imparting information. But expertise development is not simply about the accumulation of information; it is about skill development under realistic, challenging conditions.

3) Most traders fail because they never enter a path of expertise development. What does a trader need to progress from being a novice toward becoming competent toward exhibiting expertise? A curriculum: a structured process, that begins with information and understanding and then progresses steadily through skill development.


What Makes an Expert? Three Surprising Research Conclusions
Brett Steenbarger   
TraderFeed TUESDAY, JANUARY 29, 2008



Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. twistytop commented on Mar 2

    Information and knowledge are two different things. Many people have access to information, knowing what that information is telling you is a whole different thing.

  2. techy commented on Mar 2

    this is my favorite topic. why even the most intelligent, resourceful, hard working, rational professional investor/trader/money manager….is not able to consistantly make money in any kind of market?

    or why is the market so irrational that its impossible to predict/gauge the next move with any certainity?

    I am a newbie investor/trader…and i am choosing to stay in cash, because investing for long term looks too risky compared to the reward.

    i would love to go short, but forces working against short positions are too big, and i do not have conviction from my knowledge/analysis that these forces will be finally made to bite dust and accept the reality that equities are very overpriced due to the risk present in the macro economy.

    the forces are:
    1. atleast 60% of money in market from mutual fund, 401k, pension funds etc.. are invested only in long positions
    2. Gov policies all over the world favor stock market….because it leads to wealth creation effect leading to better economy.
    3. most financila institutions make money if the market stays positive hence they try everything to keep it that way.

    please point out where i am wrong?

  3. m3 commented on Mar 2

    m3’s guide to expertise:

    1) screw up
    2) stop trading
    3) figure out why you screwed up, and adjust accordingly
    4) trade again
    5) repeat #1 & adjust until you screw up less than you succeed.

    it sounds simple, but the key is analyzing and preventing mistakes, NOT recreating the successes.

    i’ve learned vastly more from losing money than making it.

  4. Marcus Aurelius commented on Mar 2

    Apparently, if you hang a shingle that says so, you’re an expert.


    Posted by: m3 | Mar 2, 2008 12:30:46

    Not a jab, but your post implies that you are an expert at losing money.

  5. m3 commented on Mar 2


    #1 – people don’t consistently make money in the market for one simple reason: the stock market doesn’t exist to make us rich. it exists for public corporations to raise capital. you’re asking the market to accomplish a goal for which it was not intended.

    #2 – i don’t think the problem is that the market is irrational (which it is; it’s driven by fear and greed). i think that the problem is that we try to impose a linear, logical, mathematical framework onto something that is inherently non-linear, illogical and non-mathematical.

    i always found it interesting that numbers guys (analysts/economists) never seem to get the market right, but non-numbers guys (traders) often do.

    #3 – i agree with the comments about going short; i’ve had that struggle too. i can’t fight the 800-lb gorillas with my dinky IRA, so the best thing for me was to not fight and join them, or raise cash as an alternative to shorting. it’s worked for me, so far…

    my .02

  6. Pat G. commented on Mar 2

    I have met quite a few “educated dummies” in my life time. On the other hand, people with above average common sense are much harder to find. Why? Because it takes years of life’s experiences (trial & error) to develop common sense. It can not be taught in a classroom. You either develop it or not.

  7. flory commented on Mar 2

    To return to junior high for a moment…

    what makes an expert?

    – X is a mathematical quantity denoting the unknown, and

    – a ‘spurt’ is a drip of water under pressure, therefore

    – an ‘expert’ is an unknown drip under pressure.

  8. Will Rahal commented on Mar 2

    An “expert” can provide “good” data supportive of an illusion. I posted
    about how, analyzing the economy “ex” a variable, can lead to a false sense of comfort.
    GDP ex Housing, for example, looks good.
    Ex Food & Energy there is little inflation.
    The inflation in Food & Energy, however are the main culprit of a soft economy.
    See “ANALYZE ex THIS!”

  9. andrew commented on Mar 2

    Barry, do you really believe #3? You’ve never been through a journalism or advertising or Web technologies curriculum, as far as I’m aware, but if I imagine an expert in the economy of blogging, you’re it.

    Many experts I know (thinking of various fields here) have learned by hanging around a place of activity / studying and practicing / finding people to ask questions of, etc. … bringing their own structure to the table, along with discipline, ability to self-criticize, and a desire to learn.

    God help us if only our universities can confer expertise.

  10. dblwyo commented on Mar 2

    Back in the day when we were building AI applications for all sorts of things the model of the development path was apprentice, journeyman, expert, master. An apprentice was learning the details by rote, a journeyman was someone who pretty well knew the bulk of their domain but proceeded by careful steps and rigorous logic and expert was somebody who’d reduced a vast body of knowledge, experience to a set of intuitive rules that let them make accurate decisions on the fly. And a Master – was someone who could develop new rules. We built a lot of systems that way, including the ones that schedule the top-secret spy satellites overhead. You don’t hear much about AI as a separate discipline these days because the approach is now built into so many different things it’s ubiquitous. Sounds like those findings mirror and support Doc S’s arguments. As for his advice on careful development of expertise and the paths and disciplines, well consider the SciAm special report on “The Expert Mind” from ’06 which found that innate capabilities were valuable but genius resulted as much from early and constant structured nurturing as anything.

  11. Kuds commented on Mar 2

    Experience makes an expert? The expert is the one who survived the experience.

  12. Bud commented on Mar 2

    Expert traders succeed b/c they focus the most on money management and exercise strict discipline when following their trading plan. Most fail because they spend most of their time on analysis clouded by a plethora of conflicting indicators. By the way, “trader” and “investor” are not synonymous; two very different skill sets/temperaments.

Posted Under