How Much Prep Time Do You Need Each Night?

  • August 25, 2004
  • Rob Hanna

Looks
like this dead cat was designed with a rubber core.  It seems the
more I badmouth this market the more it goes up.  This rally has been far more
persistent than I originally anticipated.  The S&P came very close to its 1108
resistance level today.  Traders must be nimble if they are going to play right
now.  The market is short-term overbought in addition to being near resistance. 
A move down would seem likely.  If the market can manage to break through this
resistance level, though, that could cause additional short covering and another
quick move higher.  It will be interesting to watch over the next couple of
days.  One important thing to watch will be how the market pulls back when in
finally does.  If the pullback is fairly orderly and the rally tries to
re-assert itself, then it may be time to switch camps. 

 

One topic I’ve had some
conversations with traders about lately is prep time.  How much time do you need
to spend between 4pm and 9:30am the next trading day preparing for your market
day?

 

The answer to this question is
highly dependant on your style of trading.  Traders who focus on trading one
stock or futures contract may need much less prep time than those who look to
manage a diversified portfolio.  For one-position traders it may be nothing more
than reviewing the days market action, reviewing their trades, and setting up
their support and resistance levels for the next day.  Then before the bell once
again reviewing their levels, checking the news, seeing how the futures are
trading and deciding on their plan of attack.

 

Other traders need to run
scans, review their stock lists, positions, stop levels, etc. in addition to
reviewing the market.

 

^next^

 

So how much time do you need to
do all this?

 

Successful one-position traders
that I know still take at least a half-hour each day.  Multi-position traders
normally need at least an hour.  These are minimums.  (I know — IBD says all you
need is their newspaper and 20 minutes a day — that’s not enough.)  Of course
the time to do all this may differ greatly based upon your strategies and market
conditions.  For instance in a raging bull, a long-only CANSLIM trader will have
a lot more charts that need to be reviewed than they would in a well-established
bear market.

 

You don’t want to take too much
time, though.  If your daily routine lasts much more than 2 ½ hours total you
should try and find a way to trim the fat.  Time needs to be spent doing other
things as well.  From a trading standpoint, this means learning (reading books,
studying training software, backtesting ideas, etc.)  To be happy and
successful, some time away from trading is also needed.  It’s difficult to have
time to do anything other than trade and prepare for the next day if your
typical routine takes more than 2 ½ hours.  Try and take some time to relax,
exercise, visit with friends or family, etc.  Don’t let yourself become overly
consumed with your trading.

 

Preparation is extremely
important.  I always say that I make most of my money during my prep-time as
opposed to during the trading day.  During the trading day I’m just executing my
plan.  Prep-time is when I devise the plan.  Still, you can’t let trading become
all-consuming.  You need to be able to do some other things.  Take the time to
do your prep-work, but don’t let it take all your time.

 

Best of luck with your trading,

 

Rob 

robhanna@comcast.net

 

Â