Yesterday was a very strange day on the blog. For the first time in probably a year, I did not post at all on a trading day – and yet the blog set an all-time record for most hits in a single day.
Those seemingly incongruous two facts got me to thinking about my best day of trading. Ironically, on that day I did not make a single trade. Instead, I simply acted as a slightly bemused caretaker for several large positions that just happened to be moving in the right direction on the same day. As was the case with the blog, once again I did nothing and had my best results.
All this got brought me back to thinking about the trader development stage model and the importance of understanding how a trader spends his or her time. Is almost all of your time spent on researching “the next big thing” or uncovering penny stocks that are flying under the radar of the investment community? Do you obsess over every uptick and downtick of the stocks in your portfolio and check your portfolio balance even more often than you check for new email? If this sounds all too familiar, then I suspect you are mired in stage 1 of the trader stage development model and still have too much of a stock-centric view of trading.
A good trading day for me is one in which I make no trades. On those days I can devote almost my full attention to research and development. This means looking at things like new asset classes, new products, new exit rules, new strategies and new approaches to risk management. Next month my favorite strategies may stop working. While I have no idea which penny stocks may perform as well or better than my current approach, I already have a couple of promising strategies ready to be deployed that fit my personality, risk profile and strategic objectives.
So…how do you spend your trading day and what are the implications for long-terms investment success?
For related posts on this subject, readers are encouraged to check out: