Give yourself the time of day
Often traders don’t realise when they do their trading can impact their choices and returns. Maybe they make most of their money first thing in the morning, and their evening trading is costing them all their profits?
Perhaps you sneak a trading session in during lunch when you are unfocussed and hungry. Often the times you trade during the day impacts your performance.
Here we have a trader who is losing money. They have a weakness in trading in the morning, and a strength in the afternoon. If this trader did every trade like they did in the afternoon, they would be profitable.
Do you have an edge in your time of day? Check now here.
When you are doing your trading matters, for three reasons:
1. The markets
2. External environmental factors
3. Trading energy
1. The markets
Market nuances are in constant flux, and different styles of trading are more suited to different market conditions. Take the simple case of the market opens and closes. The change in pace, and your experience levels in these markets might be an issue for you.
When we look a winning trader’s trades hourly, we see a strength between the hours of 9-10am.
What occurs during that time? The US stock market opens at 9.30am. It is one possible theory this trader should consider. This trader has a strength in their trading during that time of excitability. The volatility of the market provides an opportunity for this trader to make money. This is an experienced trader, who uses his experience at the opens successfully to outperform his other trades.
2. External environmental factors
Is your morning very busy with other stuff, and afternoon more relaxed and easier to focus?
Successful traders don’t just study their trading behaviour; they look at everything going on in their lives.
You need to take a step back from your trading and examine other factors in your environment that could be indirectly impacting your choices.
If you know your mornings include a rush beating the traffic , or your afternoons are sluggish because you eat a big lunch, you might want to look at how you can improve trading outcomes during that time. Maybe take a walk after lunch or work from home early in the morning to allow you to trade with a clear head.
Creating good choices and habits isn’t just about motivation and willpower. By tweaking your environment, you can create the foundation to make good trading decisions.
3. Trading energy
Does it take you a while to warm up to the market action? After a lot of trading, is it time to stop earlier than you do?
Look at key metrics in your trading history that will show you where your strengths and weaknesses are. Check out the first trade of the day, the time between trades, and your losing streaks. When is your energy at it’s peak, and when is it lowest?
Your energy directly correlates to your trading choices. Like the muscles in our body, our brain tires when we have to use it a lot. Think of it like starting with full glass of water each morning, and with each decision we make during the day, we take a tiny sip of water. We then have to make hundreds of decisions during the way day (whether to snooze, what to wear, which coffee to get, how to get to work, which email to answer first, and all that is before 9.30AM!), so by the time bedtime rolls around, we are often left with an empty glass.
This mental fatigue can cause us to make ill-informed and rash decisions. If in the morning when we choose what products to trade in, we are more likely to weigh up the pros and cons and make an educated, rational choice. By the end of the day, the mental effect of choice after choice has tired us, and so we often take shortcuts with our decision making process, or just stick with what we’re already doing.
Throughout the trading day, make sure to take breaks. Hit pause on what you are doing, and come back to your trading when you’ve had a chance to reset. Even small 10 minute breaks can reset your energy and stop you from making reckless decisions.
To summarise, the time of the day in which you are trading can impact your returns. This can be because of:
· The markets
· Your trading environment
· Your energy levels
Becoming aware of when in the day you are strong and when you are weak will allow you to pause and reflect when you engage in unprofitable behaviour, and continue trading when you are doing well.
Read More:
In the first of our series about exploring your trading edges, we look at the number of products a trader trades, and how this impacts profitability.
In the second, we explored whether your most traded product is really your best.
In the third, we looked at products you don’t trade that often, and how they impact your performance.