Geography, Focus and Strategy

Way back in 2007, in Bicoastal Trading…Or Are You Trading in the Right Time Zone? I offered some thoughts on my experience trading on the West Coast versus the East Coast. At the time, I speculated that the Mountain Time Zone might be the best place to have a trading life that was seamlessly interwoven with the rest that life has to offer.

In the intervening years, I have made a few trips to Hawaii and am now convinced that at least for those who are content being an end-of-day trader, Hawaii may indeed be the ideal trading paradise – and certainly one with the most alluring geography dividend.

Last month, when I was taking some time away (or mostly away) from the markets, it struck me how much geography has influenced what I focus on, what and how I trade, and more broadly what strategies I implement.

When I am on the East Coast, for instance, I place much more emphasis on the European markets and economic data that is released just before or after the opening bell. I am much more likely to trade futures and focus my attention on the many blue chips whose earnings are released before the market opens. I may even break with tradition and turn on CNBC. In short, I have a much greater BMO focus.

By contrast, when I am on the West Coast, I find that I focus more on the Asian markets (checking in before I go to bed), trade a preponderance of West Coast technology stocks that generally report after the markets are closed and also find myself trading in the after-hours session much more often.

In Hawaii, everything is different. The markets close at 11:00 a.m. (10:00 a.m. during daylight savings time) and my routine switches to glancing at the markets, going out for a run, checking to see if the markets are relatively quiet when I return, showering and going for breakfast, then making any position adjustments just prior to the closing bell. All strategies become end of day strategies and short-term trades are much more likely to be multi-day swing trades than day trades.

In a nutshell, my geography determines where (and when) I focus my attention, and that focus has important implications for what I trade, when I trade it and what my anticipated holding period is for each position. Strategy, therefore, becomes a byproduct of geography.

There is nothing like Hawaii-Aleutian Standard Time to put the world in a different perspective and to serve as a reminder that no matter where you are – either as a visitor or with roots firmly in the ground – it is important to match your strategies and focus to your geography and time zone.

Related posts:

• Bicoastal Trading…Or Are You Trading in the Right Time Zone?
• The Education of a Trader
• Trader Development Stage Model – Version 2.0
• Draft Trader Development Stage Model
• Comfort Zones, Focus and Thinking Like a Biotech Firm
• Can Selling Options Make You a Better Trader?
• A Dozen Things My Trading Accounts are Thankful For
• On Trading Rules and Guidelines

[Future naked options sellers line up for another grueling day of work at Shipwreck Beach, Kauai]

Disclosure(s): none

Bicoastal Trading…or Are You Trading in the Right Time Zone?

Last week I had a chance to trade on both coasts of the United States. Even though I grew up on the East Coast, I must say that I am more enamored with the manner in which the West Coast trading day fits into my life than the East Coast variant.

Assuming that you are trading NYSE hours of 9:30 to 4:00 ET, here the pros and cons of each time zone, at least as I see them.

East Coast / ET

Pros

• Anything that happens overnight can be fully digested before the market opens the next morning
• No need to bother to check with Asia or do any homework before you go to sleep
• If desired, you can easily put in 3-4 hours of preparation time before the market opens
• Working hours are closely correlated with those of your friends and family

Cons

• If you have all that time after waking and before the market opens, there is a tendency to think you need to fill it up with research and analysis
• After hours trading, West Coast earnings conference calls, and other end of day activities can easily screw up dinner plans
• The market seems like it is open all day long
• If you hope to trade in addition to another full-time job, there is too much time overlap for intra-day trading
  
  

West Coast / PT

Pros

• The market closes at 1:00 p.m., so if you manage your time (and investments) well, you can have many of those afternoons off
• After hours trading and earnings conference calls are a breeze – and still leave you with half of the afternoon free
• Because of the lack of extended morning preparation time, there is a greater tendency to watch and wait during the first half hour the markets are open, rather then rush to open positions
• A part-time trader can get at least 1-2 hours of live market action in before going to work

Cons

• No sleeping in
• If you have to commute anywhere, you are forced to become part night owl
• Either you get up really early or (perhaps ‘and’) you must check on Asia and Europe each night before you go to sleep
• There is no guarantee that you can absorb all the relevant information and formulate a solid trading plan in the time available before the markets open
  
  

The Solution?

Since I started trading full-time, I have often thought that the perfect time zone to trade in was Mountain time. Jackson Hole? Telluride? In theory, at least, this would provide a good balance between having the necessary morning preparation time and the opportunity to take the better part of the afternoon off after the markets are closed for skiing, hiking, mountain biking or whatever the local environment offers. Since I mentioned Jackson Hole, Wyoming has an extremely advantageous set of tax laws (save property taxes) too.

For now I’m staying in the San Francisco Bay Area, getting up early, and paying a 9+% state income tax. Every afternoon I have off, though, I thank my lucky stars and try to spend my geography dividend.