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Know When
they can. If the particular market they trade is closed until the next day, these traders feel compelled to analyze their positions, select multiple opportunities for the next trading session, or pore endlessly over market commentary.
As a group, traders have an almost manic obsession with their mar- ket and the profit potential they perceive to be available every day. For these individuals to stop trading, even for just one day, is a huge chal- lenge. Just look at the proliferation of portable, handheld trading inter- faces offering real-time execution. What opportunity could be so grossly overwhelming that I can’t afford to ride the bus for 15 minutes because I might lose a profit?
All of this voluminous market data and all of the state-of-the-art trading vehicles have evolved over time as a method of either making sense of the madness or exploiting an ever more esoteric opportunity re- lated to the underlying fact that everything is changing and it will never stop. If you want to, you can trade options on options, you can trade pollution futures, you can trade electricity, and you can trade in- dexes on indexes; plus you can get real-time data on a palm computer while you are riding in a cab on the way to your daughter’s recital. Don’t forget your cell phone in case you have to call one of your many brokers and get your fills on your trades done in Asia or Europe last night (or was it this morning?).
This is insanity.
None of this super-connectivity or mobility will ever help any trader make better trades or maximize his potential. I want to remind everyone that the current state of evolution and financial specialization has not im- proved the trading environment enough to make more losers into winners and more winners into bigger winners. Financial evolution is spinning out of control as we start the twenty-first century.
We need to remember that trading is not a science—it is an art form.
Science does not make good art; that is why it is science. As a trader who wants to develop and maintain his edge for optimal performance and max- imum profits, you would be wise to take a step back and focus on what it is that really creates your profits. Your thinkingcreates your opportuni- ties, and if your thinking suffers, so does your opportunity.
I am of the opinion that trading is an intensely personal and subjective experience. No two traders will ever see the market in exactly the same way. No two traders will ever position themselves exactly the same way.
No two traders will focus on the same information in exactly the same way, and no two traders will ever come to the same conclusion about price action. The only thing any two traders have in common is the fact that they buy and sell in the same place. It is because of this personal and
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subjective nature of the trading environment that the issue of knowing when to take a break is so crucial. The moment your thinking stops being your best thinking possible, your performance starts to slip.
If you observe any top performer in any field, you will probably notice a few things. First, they play their game their way. If they are in business, for example, they do things a certain way and they seldom move too far away from that baseline activity. If they do change something they are do- ing in a particular way, they will have a very sound, well-thought-out rea- son. Next, they know what is important to make a profit and guard that potential in as many ways as possible. It really doesn’t matter what the profit potential is or how it is realized, they know what will work and they know that they know. As traders, we do the same things.
But many top performers in other fields remember one more thing.
They see life as a whole. They are interested in balance. They know that life is made up of many different things and that business is just one of them. In fact, they will tell you the reason they are in business the way they are is to enjoy the various other parts of life more completely, and that those things create more energy for them to work better. Business is more of a means than an end for those top performers. If you look at the lives of top-performing athletes, you will notice that while some things are different, there is a baseline that is very similar. They train regularly to stay in physical condition, they are disciplined about things like what they eat or drink, they practice their game to stay on edge, and, most impor- tant, they know when to rest.
In almost any other profession there is a range of performance across all participants. Not everyone in a profession is a top performer, but in most professions you can earn a paycheck without being a top per- former. In trading, if you are not a top performer, you most likely will suf- fer losses. It is wise to remember that you are not competing against other traders. You are competing against yourself. If you are not at the top of your game when you play, the probability that you will beat your- self increases.
Due to the subjective and personal nature of trading, part of a strong daily market presence must include proper rest. By that I don’t mean just a good night’s sleep, although that goes without saying. I mean you should take time to recharge your mental batteries. Only you can determine what that means for you personally, but you need to make regular time to get away from the markets and rest. While you are doing whatever it is that works for you, consider maybe that would also include no access to the markets as well. Perhaps part of your trade plan would be a regular weekly, monthly, or quarterly time for something else, and that includes leaving your laptop at home.
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For me personally, I discovered that regular time away from the mar- kets allowed me to relax and take a fresh perspective on things. I usually include a long four-day weekend every two or three months. If I have been doing well enough I might make it an out-of-town trip, but I always take a few days to recharge. I have a lot of hobbies that I try to enjoy more often, like building model airplanes. All of these little and larger ways of getting away from the markets does one very important thing: It frees my thinking and preserves a sense of balance. I discovered that trading, although very exciting and interesting, cannot be done to my optimum performance if I am not properly balanced. There is more to life than what we do for a liv- ing, no matter where we fall on the scale of success.
If you have a spouse or children, a sense of balance is even more critical. Many marriages have suffered when one spouse or the other gets so involved with what they do to earn income that there is no time or energy to care for what really matters—our relationships, family, and physical health. Don’t be one of those traders who climb the ladder of success only to find that it was leaning against the wrong wall. Show re- spect for your personal state of mind and the emotional health of those around you by properly balancing the intense world of successful trad- ing with the infinitely more valuable world of people and personal health. No truly successful person will allow his life to fall out of bal- ance. Trading can require more creativity, passion, commitment, and energy than most professions; trading also has the potential to leave nothing left at the end of the day for anything else. Part of a well-rounded market presence is doing something regularly that preserves your sense of balance.
Daily exercise is a great way to keep your sense of balance. Taking at least one day on the weekend to do something that requires little or no thinking is another great way to remain balanced—something like taking the kids to the zoo or a ball game. Planning a vacation at least once a year for more than just a day or two is another great way to recharge. Person- ally, I take the last two weeks of the year off for the holidays. Anything re- lated to the markets I leave at the office and I head to the islands to do some sailing. I come back completely recharged and ready to tackle the next year’s opportunities.
I’m not saying that these things will work for you, but there are doubt- less things that you personally enjoy very much that are often excluded from your life due to the pressures of trading. Doing those things regularly while disconnecting from the markets will help keep your head clear. You won’t be run down, tired, lacking energy, burned out, or juggling too many balls in the air when the right opportunity comes along. Also, you will have the mental resources free to manage those trades better, and you will see more of them.
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The important thing to remember is that this rule is about improving your performance. You really don’t need to trade every day. You aren’t go- ing to miss anything. The markets will never end and they will be here when you are back from getting tuned up again. You aren’t going to miss anything so spectacular that a game of tennis will ruin your whole year.
When you feel your performance start to slip a bit, take some time to step back, turn off the noise, and get balanced again.
The trader who tries to do it all, all the time, is the one who will make a mistake. Don’t be that trader. Know when to take a break.
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