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Making Sense of Time: How Much Time Do I Have to Trade?



I still am bemused by the number of traders I speak to who still haven’t finalized their trading plans, nor developed an idea of the way they are going to trade.  The way you are going to trade hinges a lot on your time frame you choose which is not something that is obvious to someone starting out in trading.  

One of the most important parts of being an effective trader is knowing the parameters within which you are operating.  These parameters including things like available capital, personal risk tolerance, market knowledge, and time availability.  This last one, time, could be the most important of all when developing an effective trading plan, and can go a long way in determining what and how you trade.

How much time do I have to trade?

This question should be one of the first ones any trader asks her/himself.  For some, the answer will be a lot.  For others, it will be little.  Many traders fall in between.  It does not really matter which area of the scale any given trader falls in, as effective trading can be done in essentially any time frame.  One must know, however, how much time can realistically be put into it before exploring what and how they will trade.

Trading requires two types of time.  One can be referred to as preparation time, which is those hours dedicated to developing and testing trading systems, learning about the markets, etc.  The other type of time could be described as market time, which is time dedicated to actual trading - market analysis, trade execution, and trade management.  Most people will (or at least should) spend a considerable amount of time on the former, and how much time gets spent on the latter is a function of the trader’s timeframe.

Abraham Lincoln once said, "Give me six hours to chop down a tree, and I will spend the first four sharpening the axe."

It is common for people in the markets to label trading timeframes.  For example, scalpers are those in and out of trades very quickly, with holding periods measured in minutes.  Day traders will have a slightly longer-term time horizon than scalpers but are out of all positions by the end of the day.  Short term traders generally have position holding periods in the 1-5-day range, and beyond that are medium term or position traders, who hold trades ranging from days to weeks, and even sometimes months.

Clearly, the amount of available time one has will determine which trading timeframe in which he or she can operate.  Scalping and day trading requires dedicated, uninterrupted periods focused on the market.  Someone who is frequently in and out, often distracted by phone calls and/or email, or in any other way unable to stay locked into the price action is unlikely to trade in these short timeframes successfully.  Short term trading does not demand as much focus and fixation, but still can be something of a challenge for the average person working in an office environment, depending on their work requirements.  Longer-term position trading though, is generally something anyone can find time for.  

While operating in multiple time frames for your trading is fine, it is not recommended to switch those timeframes during a trade.  At least you should avoid making a short-term trade in to a longer-term one.  That is something which tends to lead to disaster, as it probably means widening your stops, and therefore taking on more risk than you originally intended.  Going the other way, long-term to short-term, is more acceptable because it usually means tightening up risk-wise.

When do I have time to trade?

Once you have figured out what kind of time you can dedicate to trading, you must take account of exactly where in the day that time occurs.  Do you have a few hours free in the morning?  Can you look at the markets over your lunch break?  Are you only able to think about trading in the evening, or maybe only on the weekends?  Maybe your time is even shorter than that, and you can only look at the markets once or twice a month.  The answer to this question is critical in determining what you trade.

For example, if you are someone who can only trade in the evenings, what could you effectively trade?  The foreign exchange (forex) market is 24-hour, but even forex has its periods of relative quiet, low volume times during the day.  However this is one of the great attractions to the forex market and that is that it is always open during the week.  If you can only trade between 2am – 4am, the forex market will be open for business.  Many commodities are bound by their local exchange hours, so short-term trading them when your available hours don’t match their open times can be a challenge.  

You need to match up your trading time frame with your time availability.  You might have a 6-hour block each day when you could do something like day trade, but it may not make sense to do so given what time of day that is.  The longer-term position trading is usually not a problem in this respect, but short-term trading can be, depending on the market.

Should I even be trading?

We all have our own risk tolerance when it comes to trading, and it is something you can only really assess yourself.  Some people can tolerate more risk, while others prefer less.  Each trader needs to be able to match up his or her ability and/or desire to take risks with the time frame in which he or she is operating.  

It is worth pointing out that sometimes trading is not the best idea regardless of how much time you have, when that is during the day, and your risk position.  We all go through periods when we are distracted by external things.  Maybe it’s exams at school or currently dealing with COVID-19 and associated problems.  Perhaps it’s work, or family stuff.  

There is no shame in taking some time off.  In fact, a lot of successful traders make a habit of it. Trading when you are off your game for any reason, can lead to poor performance.  Active traders can suffer from burn-out, and even longer-term traders can find their interest and focus waning at points.  When that happens, step back and take a break – you could very well trade better when you resume.

Make your own decision as to the time frame that makes the most sense given your situation.  Do what’s right for you.  

Good trading!

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The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.