Best Practices in Trading: Improving Your Workflow

We put thought into what we need to get done, but often don't reflect upon the ordering and organization of what we do.  Relatively simple changes in our workflow can yield profound benefits in the effectiveness and efficiency of what we do.  I recently spoke with a trader who conducted the lion's share of his market review immediately prior to the New York open after a lengthy commute into the city and after numerous conversations on the trading floor upon his arrival.  By the time he got around to figuring out what he was doing for the day, he felt a mixture of distraction, fatigue, and time pressure--none of which helped him focus on market opportunity.  His reduced concentration early in the day led to silly trading mistakes, which in turn built frustration.  Quite simply, his workflow was not setting him up for success.

Today's best practice is from reader Rahul Rijhwani who describes the organization of his trading workflow.  Here is what he has observed:

"I analyze my stocks only after market hours.  During market hours, the focus is only on execution.  This way there is a lot of clarity since there is only one task at hand at any given point.  Also, there is a sense of calm and clear thought process when analyzing and executing.

 To explain the process briefly, when the markets are closed, I open charts in my watchlist, then analyze them and set alerts at important price points based on the trading strategy.  Then I calculate the position size and note it in a diary.  When the market is open the next day, when price comes close to the point where I have set an alert, there is a beep.  I then open the chart, calculate risk/reward, and punch the order if the risk/reward is favorable."

The key takeaway here is that Rahul is using his workflow to separate the process of generating ideas from the process of following markets and executing trades.  By preparing his trades in advance, down to the details of price level and sizing, he helps ensure that his trading is controlled and planned and not reactive to the situation of the moment.  This enables him to stay clear headed without the need to resort to psychological techniques during the trading session.

Very often the organization of our time helps us stay mentally organized.  If I need to be open-minded and creative at one point in the trading day, I will make sure that the preceding activities are not ones that are taxing and stressful.  If I need to tackle stressful and detailed work, I will make sure that I do so at times when my concentration and willpower are at high levels.  A good workflow can create a rhythm during the day between activities that require energy and those that give energy.  Most of all, setting our workflow means that we control our work and it doesn't control us.  That is a great psychological benefit.

Further Reading:  Managing Your Energy Level
.