By: Craig Vanderzwaag

Incorporating the full time trading mentality when you can only keep an eye on the market part time.

There is no magic plan– or magic man with a plan that the individual trader can follow or adopt and be successful while trading in this market. There are many traders out there who will profess to their success in the market and they all have various techniques and strategies they have employed to accomplish this.  It sounds great. Do what I do… follow my moves… buy when I buy… sell when I sell… you will be fine.

The problem with that sort of program is that in this business, the idea of blindly following one persons moves is dangerous. Not because the names and themes themselves are dangerous, but because being successful at trading is more than entries and exits. It’s also about timing, its about position sizing, its about waiting on the sidelines until the risk/reward is in our favor. So doesn’t someone who generates trading ideas take those things into consideration?  Sure they do, but those might be different for you, then they are for someone you see on TV or someone you respect in a forum.  The stock might be great, yet owning it or trading it can be done many different ways by many different people.  The challenge is defining who YOU are as a trader. The challenge is to know your timeframes, your tolerance for risk, how much of your capital you want to have in play, and what your plan is for each name you bring into your portfolio. 

Services, trading forums and the media will tell you the names… what they WON’T tell you is what sort of trader you are. So how do you know?

Accept Responsibility: I do not trade full time.... that is to say my primary income is not generated by my performance in the market. What I do know is that I am responsible for my financial decisions and want them to be the best decisions possible. I am also a lay-person.  I am not a savvy Wall Street-type who is going to brilliantly maneuver through the market’s jubilance and crankiness.  I respect professionals as experts and understand it takes serious study and hard work to be “pro” no matter what the subject matter. 

Study the methods: As a “part-timer” I have internalized those thoughts as my foundation as a trader… and they are what drives me to learn, to study, to motivate, to practice, to try, to improve, to fail and ultimately succeed. Once I began to truly take responsibility for my trades out of necessity I began to define what sort of trader I am and why I am willing to put my money out there. There are many lessons and thoughts about technicals, fundamentals, and styles of trading.  You can be anticipatory, you can be reactionary, you can bottom fish, you can buy and hold, you can do what ever you want in this market (that’s one of the beauties)… but you can ONLY do it, if you know WHY you’re doing it and what your plan is.... and you can only develop a plan after you have a good understanding of who you are as a trader.

For me that means since I can’t be in-front of the market everyday I must position myself in names that are set up well and have good technical patterns. The only way to identify those patterns and feel confident is to study.  Study names that have worked and names that haven’t.  Try to identify set-ups and see if they play out the way you thought they would. The more you do this exercise the better at chart reading you will become. I do this on the weekends and mid week… no matter how invested I am, or how many positions I have.  It keeps your head in… and your new skill set sharp.

Once you become comfortable with your ability to successfully interpret technical patterns you will be less concerned when alerts come across your email.  I used to race to my computer as fast as I could and buy whatever the alert said.  This led to a lot of chasing and bad entries. Try to identify and play names that are acting well, and not just popping and dropping.

Refine your workflow: Because the amount of time the part-time trader can spend in front of the computer varies, make a personal assessment of when you will actually be able to study the charts, monitor the market and make your trades– then add a little time to account for unforeseen events that will pull you further away from the market. This will help keep you focused and your performance expectations in check. If you can be there for the open and close… then thats when you get to trade- and you must form your trading plan with that in mind.  Likewise if you can only check in during your lunch hour- then that MUST be incorporated into your decision process. It’s a given those who sit in front of the computer all day have more flexibility, can adjust their strategy on the fly and can seize very short term market trends.  We part timers don’t have that luxury. That’s ok… embrace it, make it part of your plan and don’t let performance anxiety creep in when you read about someone who caught a nice intra-day move. It’s like watching someone make a 3-pointer in basketball and then feeling bad because you missed the shot.  You were never there to take the shot to begin with so don’t let missed opportunities you never had distract you.

Identify realistic expectations: You’re not going to catch every winner,.Understand that since you can’t be there in-front of the screen all day that you’re not going to catch every stock that moves, and not going to catch every bit of the move on the ones that you do trade. THAT IS OK.  Long term success in trading is just that- long term.  When you can’t be there full-time, understand that leaving a few coins on the table is going to be part of the game- and is prudent.  It is part of protecting your capital and preserving gains… both are successes in any market.

Keep your head in the game: After 2000, I quit.  Mutual funds were it and I was going to let someone else make my money grow… buy and hold.  I didn’t really get active in the trading world again until 2005… and then will a great deal of caution.  Since then I have spent a lot of time working on a new skill set.  One that will continue to be refined and sharpened… and one that will get dull if not exercised. I may be heavily invested, I may be 5% long… it doesn’t matter… I will still keep my head in the game and continue to work.  Look at professional athletes, medical and legal professionals, financial professionals… even public safety professionals… they are all constantly working on their craft, they continue to train and to improve.... and they are successful for it.  For us part-timers… adopting their mind-set is a giant step towards profitable trading.