Sunday, December 18, 2016

Improving Your Trading by Developing the Right Daily Routines

How many times have you looked back on a market day and wondered how you could have possibly missed opportunities that presented themselves?  I'm not sure this is always because of hindsight bias.  Sometimes we miss opportunities because we're not in the right mindset for processing the new information markets are providing.

Here are a few elements that can impair our ability to read markets in real time:

*  Fatigue - This can result from lack of sleep, poor quality sleep, draining of concentration during extended focus, lack of exercise, and poor nutrition;

*  Stress - This can result from the negative self-talk that accompanies losses and mistakes, as well as from pressures we feel about our finances, relationships, and other important areas of life;

*  Cognitive Inflexibility - This can result from becoming so locked into a particular view that we do not actively seek out new and different information, do not look on multiple time frames, and do not look at all relevant market information.

Think about your daily routines.  How well do they provide energy and concentration, and to what degree do they contribute to fatigue?  How do your daily routines channel your focus constructively, and to what degree to they add stress?  How well do your routines keep you open minded and fresh in thought, and to what degree do they lock you into stale views?

A great deal of trading skill comes from pattern recognition and openness to signals from the head and gut.  Many traders attempt to read markets while engaging in routines that effectively shut their eyes.  I strongly suspect there is a great deal we can do to turn our minds and bodies into ever-better signal processors.  This form of market preparation may be every bit as important as what we do to generate ideas and trades: the key to improving our trading performance lies in our mastery of daily routines. 

Further Reading:  Trading and Information Processing