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Trading Psychology

The On-Time Trader

Traders Journal - On time traders

How you perceive and utilize time can make the difference between whether you are successful or not in following your trading rules.

To recognize how you relate to time, ask yourself the following question:
         
Are you the person who is always ‘on time’ and resents people who are not or are you the person who feels that being late is not a “big deal” and who gets annoyed with those people who insist on living ‘by the clock?’

 

Some traders live with a combination of ‘on time’ and ‘in time’ behaviors depending upon the situation.  They may be ‘on time’ for the activities that they enjoy but procrastinate when it comes to completing tasks that they would rather have to do.  For the most part, ‘on time’ people are pretty consistent with being ‘on time’ for all of the activities of their life. The same holds true, in reverse, for ‘in time’ people. 

What a trader’s relationship to time means is that an ‘in time’ person requires more time than an ‘on time’ person to go through the process of making a decision.  A trader is more likely to be profitable if he chooses to work in a timeframe that he is comfortable with rather than trying to force a strategy that does not suit his personality.  However, if you are not currently happy with the way that you process time and feel that it is affecting your trading results, you will need to seek professional help if you want to change your time strategy.

‘On time’ people are more likely to be successful with short-term trading strategies because they can handle making decisions about taking risk more quickly.  They set priorities to follow their rules by silencing the inner chatter that makes ‘in time’ people want to re-think and make more deliberate decisions.  ‘In time’ people are more likely to be successful with longer-term systems because they set their priorities to check every angle of a trade before making a decision. 

“Jack be nimble, Jack be quick”
Jack was an ‘in time’ person who was very successful as an entrepreneur.  One of the reasons for his business success was that he performed extensive due diligence before reaching a decision.  When he approached becoming a trader, he used this same strategy.  First, he perused nearly 100 trading systems, narrowing his choices down to 30 potential systems that he was interested enough in to investigate further.  Then, he chose one system out of the 30 that he tested to trade.  He felt that it was a system that was simple and easy to follow giving profitable results in simulation. 

To strengthen this belief, he had a computer programmer back-test the system and adjusted his trading rules to bring in even higher returns.  He thought that with all of this due diligence, he was ready to become a highly profitable trader.  But, alas, Jack found that “he” was in the way of making quick trading choices.  This is when he called me to evaluate the psychological issues that were sabotaging his winning system.  We found that he was an ‘in time’ person trying to make ‘on time’ decisions.  The decision-making methods that had worked so well for him in becoming a successful entrepreneur did not work for making the quick decisions required of a day trader.  He decided that he wanted to stretch his abilities to be able to make quick decisions as well as long-term calculated ones. We decided to work together to accomplish this goal.

In order to get Jack to be able to make quick decisions, I needed to find out exactly what Jack did before he made his trading decisions.  In other words, what actions did he physically perform and what was his thinking before he made his choice.  I also wanted to know how Jack ran the rest of his life when it came to making timely decisions and how those decisions about time were formed.

When little Jack was growing up, he quickly discovered that it was not okay to bring home anything less than perfect grades.  Even in his social activities, he had to be outstanding or he was met with criticism and punishment from his parents.  On the other hand, top performance reaped the rewards of praise and wonderful surprises. Consequently, Jack spent a lot of time making sure that he pleased his folks and lived up to their expectations.  Because of his thorough approach to the activities in his life, Jack learned to create what he believed to be good excuses for being late or missing appointments.  Since being ‘on time’ was not a priority for Jack’s parents, it became a non-issue for Jack.

The behaviors that Jack formed early in his life affected the way that he related to people when he became an adult.  As a businessman, Jack made many people unhappy by constantly being late for appointments.  However, everyone also knew that they could count on him to do a thorough job.  When Jack started dating his wife, who was an ‘on time person,’ she found it difficult to adjust to the fact that he was always going to be late to pick her up for a date.  This difference was the cause of many heated arguments in their relationship.


Adding to the Menu
When coaching a trader, it is important to keep the elements that have worked in your client's life.  Sometimes adding to the menu of talents can be tricky when the present talents are in conflict with the behaviors that you want to add.  For example, thinking things through before making a choice versus making a choice quickly.

Jack's strategy was:
• Recognize an entry signal that is part of his rules
• Think about what could go wrong
• Rethink calculations
• Think about a possible loss
• Feel uncomfortable about not being in control of what happens in the markets

The preferred strategy for being a day trader was:

• Recognize an entry signal that is part of the rules
• Feel good about the choice because it is based on calculated risk
• Take the trade. 

In order to accomplish this we had to change:
• Jack’s relationship with time in making trading decisions
• How he felt about losses
• Jack’s definition of being perfect in trading 
• His need to feel the punishment of not making trading decisions on time
• Set his trading rewards based on following his rules

I gave Jack tasks designed to build the skill of being an ‘on time’ person in his life.  The main reason that he was late for everything was that he had never set being ‘on time’ as his first priority.  The first step was to see the rewards resulting from being ‘on time.’  For example, he had
• less stress
• the ability to enjoy the process of preparation
• removed the need to excuse tardiness
• given a meaningful form of recognition for his new behavior. 

Then, he had to identify all of the activities that it took to prepare himself to arrive somewhere ‘on time.’  The activities included picking out what he was going to wear, having a map to his destination and leaving enough time for getting gas or a quick snack. 

Once Jack began to be on time, he found that he not only got “at-a-boys” from himself but he also got them from the people who had previously teased him for always being late.  He also found that changing this behavior did not mean that he had to give up his thoroughness in making decisions.  He did have to give up cramming so many activities into his schedule.  I told him that the activities he was giving up did not have to vanish forever.  But, he would have to choose activities that provided the best results without over-taxing himself. 

Once Jack was able to prioritize his attitude about time and be ‘on time’ for activities outside of his trading, he was ready to change his strategy for making quick trading decisions.

The Other Side of the Story
The other side of the ‘in time’ response is that sometimes the person who is ‘in time’ and not ‘on time’ is only partly responsible for the problem.  This missing piece of the puzzle appeared when I worked with a trader named Steve.  Although Steve and his wife, Marie, had a wonderful marriage in every other way, Steve was very unhappy with Marie because she was consistently late by at least half an hour and never seemed to have enough time to take care of tasks that he relied on her to perform.

When I interviewed Marie and had the opportunity to observe her behavior, the whole picture changed.  It became apparent that Marie had many things to take care of in their home before she felt that she was ready to leave.  By the time she had straightened the house, dressed the children, taken care of a host of chores and details and had finally dressed, she was late.  Her husband, however, had arranged his activities with time to spare.  Steve was able to dramatically improve the situation once he understood what it took for his wife to get ready.  By helping him to readjust his expectations and plan for the extra time that it would take his wife, Steve’s frustration disappeared. 

Marie was able to take responsibility for her part in being perpetually late by listing all of the things that she had to do before she could leave and by doing as many of those things ahead of time as possible.  She also learned to delegate to her husband and children many of the chores that she had been doing herself.  Finally, Marie learned to stop walking through her house looking at everything that needed attention and feeling that it had to be attended to immediately.  Steve had been able to prioritize his activities because he was aware of time. Now, Marie was able to do so, as well.

Trading On-time
Once a trader is able to meet his on-time obligations in the outside world, he is ready to learn how to meet his trading obligations on time.

The first step is to create a business plan.  A trader cannot learn to trade ‘on time’ if he has no sense of what his goals are and develops strategies to meet them.  The business plan must consider all contingencies with the things that can go right and the things that can go wrong.  If the trader must strengthen and develop his decision-making strategies to be able to make decisions in a shorter time frame, he should go on to step two and then to step three.

The second step is to notice his thoughts and what stands between him and taking the trade. If he is thinking such thoughts as “perhaps I should wait,” or “maybe I should check again” or “I should check with my friend or the news first,” he will be unable to take the trade ‘on time.’ He must decide on a better strategy that permits nothing to exist between recognizing the opportunity and taking the trade.

The third step is for a trader to mentally rehearse taking trades. This rehearsal is a ritual that a trader goes through when an opportunity for a trade comes so that nothing is between him and taking the trade. This mental rehearsal has its parallel in the mental rehearsal that is performed when planning to leave for an event ‘on time.’  Instead of worrying about all of the things that he should do and all the little details that need to be considered, he sets his priority to being ‘on time’ and only considers the things that will get him out of the door ‘on time.’

An ‘on time’ trader must see himself taking the trade with nothing between him and its execution. If negative emotions are creating discomfort, it is because of thoughts that precede the feeling.


Gearing Down
A third trader, Hal, was a struggling day trader whose time priorities made him a poor match for his trading style.  Hal was not interested in changing his time priorities because he was a deeply anxious person who felt more in control when he had the option to be as late as he felt that he needed to be.  Fortunately, after working with Hal, I was able to convince him that he would be better served to adapt his trading style to his time response. The result was that Hal has become a position trader.

For the first time in years, Hal is actually enjoying his trading. His old pattern was to over-think all of his trades so completely that it was nearly impossible to trade at all. He spent so much of his time getting ready to trade and finding all the things that had to be done before he could trade that he lost days and weeks in projects that never actually got him to his trading desk.  Consequently, he felt even more anxious when he finally began to trade.  His negative self-talk became a loud chorus in his head overriding his system. Needless to say, Hal was not making money in his trading.
 
It has been six months since I convinced Hal to stop day trading and to take longer-term trades.  Happily, he is enjoying his trading.  It is somewhat ironic that since he is no longer day trading, he is spending much more time in his trading.  Since he does not have to make quick responses to those painful decisions, he does not put time-consuming obstacles in the way of his trading.  Best of all, he is making money for the first time in years.  By adapting his trading style to his time response, he is actually less anxious than he used to be about time.  As an added plus, Hal is also closer to being on time than he has ever been before according to his wife.

Conclusion
Successful trading can only occur when a trader is well matched to the trading style that reflects his time priorities.  The act of being ‘on time’ results from the decision of setting priorities for being ‘on time’ and placing everything else at the service of reaching that goal.  If you are an ‘on time’ person, you are better suited for the demands of short-term trading because you have learned to prioritize your activities and thoughts to reach a goal ‘on time.’  Your mind is free to see the trade and take it in a timely way.  To follow your system without second-guessing it and to deal with risk without hearing the voices of fear and hesitation that stand in the way. 

If, however, you do not prioritize time to reach a goal in a timely way, you are not suited to short-term trading.  Your mind will be pulled away from the goal of taking the trade in a timely fashion by all of the thoughts and emotions in your head as well as all of the activities and stimuli that surround you.  The ‘in time’ trader is far better suited to position trading unless he makes the decision to transform his time priorities.  If he is willing and able to make this change in his time awareness, then the door to day trading is open to him.