Tuesday, March 17, 2015

Best Practices in Trading: Organizing Your Daily Routines

There aren't many hard and fast formulas for success in trading, but one that comes close is taking your best practices--what you do when you are successful--and turning those into positive habit patterns.  The way this is accomplished is through the creation of routines.  When we establish a routine--and then make it routine--we take our strengths and make them automatic.

Today's best practice comes from money manager @MPortfolios, who describes his process as blocks of routines:

"I've found a very beneficial component to the workday is having an organized routine, or blocks of routines, synced to the priorities of managing my practice.

I have an end of day routine that is investment management focused, where I perform a scan of all positions vs. their various 'by rule' stop levels to determine if any have triggered, if any have risen above maximum allocation levels, etc. and determine if replacement positions are indicated and what they will be.  This routine sets up the following morning's initial actions.

I start my day [second routine if I did have market open transactions to complete] by:  1. Checking notifications and scan prior day's transactions (dividends, inflows, withdrawals) to know what's on my plate from an administrative standpoint; and 2. Looking at macro spread charts of asset classes, regions, and market sectors for signs of underlying changes in the landscape.  (I use relative strength as a basis for a large part of my approach).

I've found that a really helpful byproduct of this, besides the obvious benefit of being organized, is that it fosters calm, systematic decision making."

I like the idea of blocks of routines, where to-do items are clustered based on their mutual relevance and then placed in sequence to aid the running of the trading business.  In my own work, one block of routines would capture my morning workout; another would describe my review of markets; another would involve trade planning; etc.  Each of those blocks, in turn, captures very specific activities that I have found to be useful in preparation and trading.

@MPortfolios observes that this organization is a psychological tool as well as an aid to work flow.  When we are grounded in sound routines, we can work efficiently and effectively, allowing us to devote our attention to the special situations that markets always seem to present.

Further Reading:  Turning Goals Into Habit Patterns