Six Ways To Become A More Efficient Trader

  • December 8, 2003
  • Rob Hanna

Since
my
last column, the market hasn’t done much other than
to chop back and forth on decreasing volume. Looks like we are consolidating
near recent highs. As always, look out for distribution. Last Wednesday was
the first big day of distribution in a while. So far I haven’t seen any
additional evidence of it.

I would expect we might
see some volume come into the market after the Fed meeting on Tuesday, so be
ready, and know what you want to do before you get caught up in the panic (buying
or selling), if it should come to that.

Some days trading can be completely
frantic. Before you can react to one alert, the next one is buzzing. Stocks
hit your buy or sell triggers and immediately they’re trading up or down
$0.50 or more. A trade that looked great 10 minutes ago is now in the red, and
the one you almost got stopped out of is now up 3%. While this frantic pace
may seem stressful to some, most traders thrive on it. They love the action.
They crave the action. And for those that can’t do without the action,
many times it can become their undoing. Like an addict at the horse track, they
can never just sit back and enjoy a race.

On Wednesday
I spoke about the importance of taking the trades that trigger. Just as important
is not taking trades if none are triggering. For some, the desire to
put a trade on may come from the fact that they are behind their goals, whether
that’s weekly, monthly, quarterly, or whatever. Others, like the addicted
gambler, just need the action. Patience is very important and will allow you
to preserve capital for better times. Taking trades that don’t fit your
criteria is a sure-fire ticket to the poorhouse. It’s hard enough for
most people to make money when they are trading with a statistical edge. Good
luck trying to make profits consistently without an edge.

As traders, there is SO much other
work to be done than just trading. Use any slow time to your advantage and you’ll
become more efficient at your job. You’ll also be able to focus that much
more on your trades when the environment requires it.

  1. Get your accounting
    up-to-date.

  2. Backtest new ideas
    you’ve been thinking about.

  3. Dive into a new
    trading book, or study an old one.

  4. Learn some new
    techniques that might be more suitable for those times when you believe your
    techniques are out of favor.

  5. Review past trades.

  6. Maybe even take
    some time off for yourself.

Just don’t
try to make something out of nothing. Make your downtime productive and enjoyable.
You’ll need to be ready when the frantic pace picks up again. It always
does.

Good Trading,

Rob Hanna

robhanna@rcn.com