Are you fit to trade?

Are you fit to trade?

Paul King, March 31st 2008

Every time you sit down at your trading computer and make a trading decision you should have already asked yourself a simple question first:

Am I fit to trade today?

It's all too easy, once you have a well-defined trading method, or a few months (or even years) of experience behind you to get complacent and start thinking you're a mechanical trading machine that never makes any errors.

Forgetting that trading is a difficult activity to do accurately, consistently, and repeatedly without making any serious implementation errors can lose you many month's worth of profits in a single error.

When you wake up each morning take a moment while you're lying there waiting for your brain to boot up to think about how you feel. Start off with a physical check:

Does anything hurt or ache?
Do you still feel tired?
Do you have plenty of energy?
Then move onto a mental checkup:

Is anything mentally bothering you?
Are you ready and happy to go to the office?
Do you feel alert and ready for the day?
I tend to simplify these questions into a daily "score" and then have some rules about what I can and can't do depending on how low (low is bad) my score is. For example if I don't score high enough then I may decide to simply manage existing positions rather than putting on any new trades. This means I'm not making important decisions when I'm not feeling 100%.

Obviously your fitness score can, and should, be changed as you go through your daily morning routine. Sometimes, a little tiredness just needs a good hot shower to fix it. Or some slow breathing when you get to the office may improve your mental state.

The important thing is not to be expecting full performance if you're not 100% fit. It is OK to suspend trading if you're at a disadvantage mentally or physically that can more than eliminate any trading edge you have when you're 100% fit. If you keep a diary of your "fitness score" versus any implementation errors you make then it should be relatively easy to see how your error rate increases as your fitness score decreases and then you can implement rules about how to reduce your trading activity when your fitness score is not high enough.

If you're trading when not fully fit you simply increase your chances of making an error, and that is the root cause of failure for traders that do have a complete and effective trading method already defined. Don't take the risk, it's not worth it.

http://www.pmkingtrading.com/id48.html