This is a good thing.
What is maybe not such a good thing is the effect this has on us.
I spent the first couple of weeks of my break from work watching charts, prices and news. So, doing what I used to do at work but without the ever-welcome end of month financial deposit. And now I have to buy my own boozy lunches.
The obsession with the short term
I have always said that watching every tick in price in the markets is a waste of time for most of us, and I definitely include myself in that camp. Far too many of us think that trading is all about the next ten points in the Dow, the euro or Argentinian corned beef futures. This can often end up in us getting sucked into just the "noise" of the market. I do think this is a reaction to the ability to monitor short-term data wherever we are - but just because we can, doesn't mean we should.
If someone puts a trade on with a stop-loss and a target for where they think a market is going to go, watching it will not make it get there any quicker.
It could be argued that the really short-term can be something of a mug’s game. In my old job I would have conversations with people who had a strategy for trading e.g. GBP/USD and they were planning on using for example, a 15 point stop. I am not saying it can’t be done - just that it probably can’t be done by most of us.
Today, the 19th February 2014, is a great example. At the time of writing the pound is broadly unchanged from where it was at midnight. As I am a stickler for precision it is actually 1.5 ticks lower than where it was at 23:59 on the 18th. Pretty boring day? Not really, here’s the chart, click to enlarge it:
I think trading with very tight stops is how a lot of people start and find it incredibly frustrating - stopped out time and again only to see the market go the way they thought it was going to go, but without them.
So don’t be afraid of giving the market time to prove you right. You probably haven’t got a crystal ball that is going to nail the exact minute the Dow is going to explode on a 100-point rally - so give the trade a bit of leeway to work out. 20 points stops are not leeway.
I know it may be heresy in this day and age of streaming data; apps; rolling news; tweets etc. etc. - but don’t watch the screen all the time. If you are looking at daily and hourly charts is what happens in the next 15 minutes that crucial?
One of the best trades I have done in the last few months - and it is still going - is on the share Weir Group. It's up about 250 points from the middle of December precisely because I haven't interfered with it and tried to figure out where it is going in the next 3-and-a-half minutes. There is no reason why spread betting, contracts for difference, margined fx etc. can't be used for more medium term trades - it doesn't have to be all about day trading.
Find something else to do rather than watching the flashy-flashy of prices. One of those things is washing the car - my sponge skills have improved exponentially this year. The point is if you are looking for medium term moves in the markets - which I think is the right approach for people who have “normal” day jobs - then watching every tick probably means you lose sight of the big picture and end up just trading for the sake of it. Don’t be afraid to take a step back and look at a bigger time frame - wider stops, smaller size, more relaxed.
And - dare I say it - more chance of profiting.