Trading Exercise After a Break

Submitted by Marco on 29 April, 2006 - 14:21

For a professional athlete to perform their best and to minimise long term damage or short term strain, they need to do a set of stretching exercises. Flexing their joints and stretching out their muscles. For the professional trader, I think it is important for us to stretch our skills before we get into any 'strenuous' trading. With the athlete, by not stretching they risk their level of performance in that race, and in future races. Conversely, I found that from my own experiences, if I hadn't done a few trial trades or "trading exercises" before I hit my "trading groove", my trading would be seriously stuffed.

So if I haven't traded for a while, say about a fortnight or a month - due to holidays or other commitments, (and since I don’t believe in paper trading) I would simply review a few of my past trades to build up confidence, analyse a few stocks, make a decision and placing a trade. Now where is the "stretching" involved here? Well, the trade that I would place would be a smaller lot that I would usually handle. This value would vary depending upon which stock I was going to trial trade depending on their volatility and stock price. The trial trade would usually place only 10% of the usual amount that I would usually trade.

Just doing a few of these before you start trading seriously is important in your trading success. Sometimes it is a very humbling experience. After being on holidays you may have your spirits high and you may be feeling overconfident. The market would quickly bring you back into line. Or you may be a little scratchy on your trading skills - doing these small trial trades will certainly get you back into the trading discipline you had before your break. Doing a couple of trading exercises, with real money and real situations, after having some time off the markets should be able to get you back into your "trading groove."