Thursday, November 10, 2016

Overcoming Boredom and Overtrading

Steve Burns recently offered a worthwhile post on the topic of ten things to do instead of overtrading.  Many of the ideas pertain to curiosity: looking into new trades, new ideas, new sources of edge, new information.  Successful traders I've known flow naturally from trading mode to idea generation mode.  When they're not managing positions, they're working on ways of managing and developing themselves.  Part of the day is spent trading, part of the day is spent reviewing trading and setting plans and goals for the next day, and part of the day is spent gathering the information that will lead to the next day's trades.  That rhythm ensures that boredom is not a major part of the trading day, even when markets are relatively slow.

Without intellectual curiosity and the competitive drive for self-improvement, trading becomes little more than sitting in the casino and pulling the levers on slot machines.  A trading edge does not consist of a particular setup or indicator; the edge of a trader is like the edge of an athlete, reflecting ongoing training, review, practice, and performance.  Perhaps the most important element in that edge is the ability to channel curiosity in the direction of opportunity: to develop ideas of what truly moves markets and find new and better ways of assessing those factors.  Reverse engineering the dynamics of the Brexit trade in June and the Trump trade recently is a good start for exercising curiosity.  

Boredom is the surest sign of an absence of performance process.  If you're not engaged in self-improvement and creative generation of trade ideas, you'll engage in trading without the benefit of self-improvement and creative research.  We can trade for profits or we can trade for stimulation and excitement; rarely both.

Further Reading:  A Creative Cure for Overtrading