Method

How Much Time do you Have?

I don’t know about you, but my life has never been busier. Many people I speak to you share this sentiment.

To trade well takes time. It takes time to develop yourself and your skills and then actually trading takes time too. It goes without saying that time is a finite resource and trading needs to be balanced with the countless other demands on our time.

Consider this scenario:

“It’s Monday morning and your scan of the market on the weekend has brought up another trading opportunity for you. You already have three positions open and two of them are not doing so well. You have just finished breakfast and don’t have much time left before you have to bundle the kids into the car, drop them off at school and go to work.

You decide to quickly log on to the Internet and access your broker account in order to place your order for the day’s opening of trading. “Done”, you say to yourself as the trade confirmation screen appears. Quickly turning off the computer, you are off out the door to start the day.

After a tiring day at work, picking up at late notice your 13 year old son from soccer practice, and cooking dinner for the family, you decide to check your email. Three messages make their way to your PC from somewhere as your messages download. There is one from your broker confirming that your order #5489321 was processed at 10:08 a.m. “Oh, that’s right” you say laughingly to yourself, as you remember the order you placed hurriedly that morning.

I wonder how my other positions are going, you think half enthused as you think about going to bed. You download your daily market data and proceed to check how your other positions went.

“Damn!” You have just realised that one of your warrant positions has gone through the stop you had placed late last week and another has traded below the stop during the day but closed above it. In fact, the call warrant position has finished well below the stop and you think how good it would be to be able to access live market prices at work.

Thinking about other matters, you decide to access your broker account again and put in an order to sell the warrant position hoping that your order gets processed on the open of the day’s trading tomorrow morning. Before you do that, the kids need to be put to bed and then a few other things done before work tomorrow. Away from the computer you go to attend to other matters.

Later that night, you decide to call it a night and you turn the computer off having made the decision to see how the warrant position goes tomorrow. Chances are, it will bounce back you think to yourself.”

OK, have a think about this scenario. Does some of this sound familiar to you, or could you picture this happening to you? Do you not have sufficient time to adequately commit to your trading or do you think you may struggle to balance your trading with other things in your life? If you are presently trading, do you find yourself cutting corners in your trading plan to accommodate other commitments?

In my study of the very successful traders in the world, I found they possessed similar key characteristics despite obvious differences in other things like their ages, backgrounds, and education. First, they realised the importance of discipline as a cornerstone of their success and second, they attributed their money management techniques as being vital to their long term success.

Third and probably of most significance to the person described earlier, they realise that they have all discovered an approach to trading that is right for them and they are comfortable with. The way they trade suits their personality.

Many traders don’t have a trading plan and base their decisions on emotional impulses and hunches, hence the high failure rate of traders. Those who do have a plan must have the discipline and internal control to adhere to it. Many people have heard that you need to develop a trading plan that is right for you, however how can you do that if you don’t adequately assess yourself and your character?

The process of developing a plan that is right for you is a journey of self-discovery and those who approach trading with the goal of making more money than anyone else are approaching their plan development the wrong way.

Elsewhere, I have discussed briefly other personal factors to consider when conducting a self assessment in order to start developing a suitable trading plan. One of the most important of these, yet one of the simplest is time available. How much time can you seriously commit to your trading every day, and every week?

The answer to this question will affect the type of trading plan you develop for yourself, and therefore must be considered early on. I believe this is one area that is often overlooked as a part of plan development.

Simply applied to the scenario earlier – working full time, not having access to market prices during the day and trying to keep a family, the person found it difficult to monitor their open positions let alone conduct some form of analysis to try and identify potential trades. Do you think they have a trading plan that is right for them?

I define short term trading as an approach that considers trends of approximately 3 to 10 days in duration. Short term trading by its very nature demands constant attention and a reasonable amount of your time during the trading week in order to monitor open positions, adjust stops, conduct analysis and make your trading decisions.

Generally speaking the potential for returns in short term trading is greater than those with medium or long term trading approaches especially when derivatives (options, warrants etc) are included in the trading, hence the attraction to this style of trading.

As people are generally infatuated with money, they are naturally drawn to short term trading because of the very real possibility of achieving good returns quickly. I am suggesting that for many people, a short term trading plan may not be right for them and if it is not right for them, the chances are they will not achieve trading success over the long term.

What can you do? Think right now about how much time is available for your trading or how much time you are prepared to commit to your trading. If you are going to cut corners in your plan because you don’t have enough time, then you are going to need to re-evaluate the way you approach trading. This is a serious issue for many participants in the market.

You will need to consider one of two options. First, you can provide yourself the right tools and avail yourself of market information during the day and ensure that you have your trading diary with you in order to facilitate decision making during the day.

Numerous services provide prices during the trading day whether it be through a pager, SMS to your mobile phone, or email alerts. This may be a small price to pay for reliable market information that is readily available and that you can trust.

As an aside, another issue is whether or not you have established a formal routine for yourself. This simple but effective tool allows you to find and schedule time amongst other things in your life, that you can afford for your trading but more importantly encourages you to commit to your routine therefore ensuring corners are not cut and you diligently follow your plan.

Finally, if you are not going to have lots of time during the trading week, then it may be worth considering a more medium term approach to your trading, where you won’t be trading as often and your valuable time won’t be in such demand. I define medium term trading as an approach that considers trends of approximately 3 to 12 weeks in duration. Medium term trading by its very nature demands less of your time and in most cases, eliminates the use of derivatives.

This may be a difficult situation for some people as they may have their mind set on a short term plan, but if your day in any way matches the person described earlier, then I think you will be increasing your chances of achieving longer term trading success if you do adopt of a more medium term approach.