Important Trading Lesson

An important trading lesson is to evaluate your return on time. It is so easy when you are getting into trading or even if you already trade for a living, to surround yourself with trading sources like twitter trader feeds, instant chats, trading forums, and overall market or trading information.

It can be hard to figure out what works and what doesn’t in trading so you find yourself with multiple internet browser windows open following chats or twitter streams and your trading plan consists of lots of chart setups with multiple indicators, multiple time frames on your charts, an ever growing watch list of stocks that traders you follow were talking about or that you found from one of your multiple trading strategies.

If this sounds like you then don’t worry as you aren’t alone. I think almost every trader or even active investor can also relate to the term “analysis paralysis” at some point in their trading education.

If you step back and look at the amount of time you are spending following the markets or reading about financial news, what is the profit return on your time.

I mean if you make 100% on $10,000 portfolio in a year that sounds like a great return but what if you spent 15 hours a week(about 2hours a night) following trader chat rooms, reading financial blogs, following stock charts, the list goes on…you can see that the return for time spent is obviously quite poor.

15 Hours a week x 52 weeks = 780 Hours a year for $10,000

It is so easy to get caught up in all the day-to-day stock news and trying to find that winning edge that you end up spending endless hours jumping around among trading strategies and systems and usually just churn your account.

Trading Information Overload Solution

Instead what if you just focused on a specific trading plan that was proven to work over time and that fit your lifestyle.

Most people have a hard time sticking to a trading plan especially after having a losing streak, so they move onto a new trading tactic or software program or crazy technical indicator (or follow some stock chat room pick).

Trading is a huge mental game but by having a plan it will keep you focused and away from distractions like chat rooms or twitter talk. Make sure to have a solid understanding of your goals and find a trading style that not only fits your risk tolerance but lifestyle.

I think the biggest lessons I have learned is that I can’t try to be good at all styles of trading and that some of best traders are able to keep their investing system as simple as possible.

The smartest traders I have read about or followed all have the same attributes in common:

  1. They follow a specific system that is repetitive.
  2. They keep the odds in their favor with defined risk with every trade.
  3. Doesn’t require lots of indicators but focus more on pure price action in the charts.
  4. Proven to work over time.
  5. Tracks their results and routinely study their losses and improve from their mistakes.

This is not a post about creating a trading plan or what trading system to follow but more about reminding people to step back and evaluate their results and time spent trading.

Is your return on time spent trading worth it ?

You aren’t creating a business with employees when trading so you can’t outsource anything or leverage your time like you can with employees or a website that sells for you 24/7.

If you are going to treat trading like a business then you really need to be disciplined with your time.

That is why day trading which involves spending a lot of time each day trading should generate a very good return vs. a trend trader who might just check their positions for 10 minutes each day and can use the rest of their time to do other income producing activities.

If you find that you are just churning your account and jumping around to various investing chat boards with no routine in place with a defined plan, then this a good reminder to start now.

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