Break Your Trading Routine

Routines are what define many of us as people. They can be defined as a group of habits and tasks that are often bounded by time intervals. Routines are the great stabilizers in life, and help us to preserve precious mental and physical resources. When times are tough, they allow us to coast on autopilot. They bring an element of certainty and regularity in an unstable world.

In my profession which entails building models and systems, routines are impossible– I am always forced to do new research or solve new problems. I am paid for approaching things in a novel way, sophisticated clientele don’t need me to find a boxed solution. Rather than operating 9-5, my hours can range from 8am-5am to accomodate overseas clients or tight deadlines– and it all revolves around what needs to be done. On the one hand, I wish my life involved more routine– I am always running in third gear and cannot risk slipping into cruise control (ie mediocrity). Its often  difficult to plan to do ordinary activities. Many times to keep my edge,  I will simply take some time off to go for a walk–especially in the spring and summer–just to think about how to solve various issues.  Sometimes, I will go to a coffee shop without a book and a computer and just reflect on some ideas.

I notice that when I do not have the time to do these things, my creativity suffers and I am often approaching problems in a circular manner—like a dog chasing its tail.  I notice the same effect when I am forced to stick to a structured schedule, or am overloaded with correspondence via modern communications. I often marvel how anyone in this century gets anything done at all of tangible value since the advent of email and the blackberry. The cynical side of me believes that people have allowed themselves to confuse activity with actual work.  According to my friends in the corporate world, if you are not going to meetings or answering emails  you apparently aren’t getting anything done.

Trading is the same way– its easy to think of yourself as a pro trader simply because you get up every day in the morning and follow the news on Bloomberg or Reuters before the open. Its easy to think you are a pro simply because you have your own proprietary tools, and you have a cool workstation. Maybe you think that you will be successful simply because you are diligent and have a disciplined routine. Perhaps you fancy yourself a player because you place dozens of trades a day. Well the truth is that many of these activities are potentially positive, but the real trick is to recognize that it is not enough to look and act the part of a trader. It is not enough to just try to stay unflinchingly consistent in executing your gameplan. You have to sometimes shake things up, and think of new ways to make money–because the truth is, while you are settling into your comfort zone, someone else is trying to figure out a plan to eat your lunch.

Every week you should try to make some time to think outside of the box. Read or re-read a new trading book (note I re-read my books sometimes 4-5 times). Spend some time on system design- but force yourself to tackle something new or something that you have had trouble solving in the past.  Try to learn a new instrument, or search for a new type of trading setup to compliment your most reliable methods so you having something to fall back on if things get tough. Trading is like nature–always evolving and different species thrive or die off as environments change. I can recall many “pros” in my poker playing days that wanted to always play the same way and were often in denial when their drawdowns lasted much longer than luck would dictate. They resisted change right up until the bitter end–until even the weakest players figured them out and milked them dry. Friends of mine who survived and even went on to win major tournaments were always looking to improve and try new strategies–while respecting that they would not completely re-define their game in doing so. They focused on  figuring out how to win in the most efficient manner even while being very efficient winners.

Think of some of the pioneers in the trading world: 1) Jesse Livermore 2) Nicholas Darvas 3) William O’Neil 4) Paul Tudor Jones. All of these people approached the market with a unique insight that allowed them to reach levels far beyond anyone else. They all worked hard and tried to constantly re-invent or re-invigorate their methods with sometimes costly experiments.  Its not enough to just be discipline, and its not enough to just be smart or knowledgeable. Universities these days are teeming with people like that. You need to step away from your routines and away from the crowd and be different.  Treat your most reliable trading methods as part of a discplined routine–like flossing your teeth. But take some time to think carefully outside of the box and add to your strategy mix, otherwise you face two possible undesirable outcomes: 1) you may get bored and find diversions through impulsive and costly mistakes 2) you may face a sudden struggle for survival if your bread and butter trades are no longer working.