Day Trading In The New Year 2012

As the new year begins, the usual begins to occur. Gyms across the country are going to see memberships increase as the “resolution” crowd starts to burrow into every corner of the halls of fitness. It is pretty admirable as these people have decided to better themselves. The fact is that it is short lived. Sure they will make a good run at it but within a month, their membership card finds its way into the bottom of the drawer. There are many reasons for this but one sticks out for me and that is the law of diminishing returns. They jump in with both feet expecting twice the amount of results. Sooner or later they burn out or are out due to an injury.

What does this have to do with trading.

During the beginning of the year, many companies start their marketing process. They know that many people decide that “this year will be different”. This is the year they shrug of the shackles of a day job (or just want to earn a part time income) and will enter the wonderful world of instant riches known as trading. We all know that is a fallacy but just stay with me here. They dive headfirst into the best sales pitched strategy, top out their credit lines and go to work for their pot of gold. It never ends well.

Three Pillars

One of the biggest problems is these people never learnt about trading. Sure they trade...but are they in the business of trading? In order to succeed, every trader that is consistently profitable will tell you that without the basics, regardless of the strategy, you will fail. A solid strategy, knowledge of the psychological factors and money management are the three cornerstones of at least having a shot at succeeding. Another problem takes root and that is consumption. Many people, myself included, start off with being totally consumed by trading and attempt to hammer success. We lose all concept of time and unfortunately relationships with family and ourselves can suffer. It isn’t pretty. The kicker is that stuffing yourself in your office for hours upon hours does not always result in improvement. Many times, the opposite is true. You must find a way to budget your time so that all cornerstones of trading are covered. You must spend equal amounts of time on the cornerstones without an adverse affect on not just what you absorb, but the external costs as well.

We look to the tomato.

Personally, I get stuck with intense focus on something and before I realize, the hours have slipped away. More interesting, I found that my productivity did not match time spent. There is no denying that intense focus is needed in trading. It is needed during the learning curve and, depending on your strategy, it is needed from the time you sit at the desk. Ever worked on a problem only to have a set of “fresh eyes” find the solution? You missed the obvious. There is a solution and it is brought to you by Francesco Cirillo and the Pomodoro Technique.

1. Set a task. This can either be studying your strategy, learning about money management or reading a book such as Trading in the Zone
2. Set an annoying ticking kitchen time for 25 minutes
3.Work like a laser on your chosen task until the bell rings
4.Take a 5 minute break

This time management technique has been around since the 1980’s and the main benefit is that the intense focus with frequent breaks keeps you fresh. Chart out what you want to accomplish when you sit at your trading desk and start the timer. There is a little more to this and you can find all the information at the Pomodoro Technique website http://www.pomodorotechnique.com/

Using this technique, you should end up with a solid grasp of your trading strategy and the cornerstones that go into making a well rounded trader. It may not be as quick as diving headfirst but you will come away, I feel, with a deeper understanding that sits at your core. As well, burnout will be a term you may never ever meet. Good trading.