The past 5 months have been fairly volatile. The market swings up and down have been swift and momentous, highlighting the many twists and turns of investor emotions and sentiment during a time of consolidation (and uncertainty). It’s during these periods that we learn a lot about ourselves as traders. We either follow our plans or risk compromising who we are as traders… and that has consequences that go beyond dollar signs.
Our Trader Identity: Our Trading Time Frames
You see, no matter what the market serves up (and trust me, it doesn’t owe you a thing), any type of trader can survive and thrive. It’s all about processes and trading time frames. Although this subject shows up from time to time in my research notes, I want to reiterate the importance of trading time frames. Every trade we enter has an aspect of expectation that is almost always tied to some sort of time frame. Think about it. As you make your decision to buy a stock and decide what you are willing to risk (your stop level), you almost always apply a time frame to it. A day trade; a multi-day trade, a swing trade, a trend trade, a long-term investment.
I cannot emphasize enough how important it is that we stick to our trading time frames when making decisions to buy or sell. When I make a trading mistake it is almost always tied pushing my time frame out a bit… as if the reason I went into the trade still applies further on down the timeline (and likely in the red). Bad things tend to happen when the voice in our head tells us to adjust our time frame.
When your mind starts justifying why a trade can still work beyond its expiration date, it’s time to cut bait.
Fellow SIM contributor and author of the NewTraderU blog, Steve Burns, is a great educator and resource on trading systems, time frames, and discipline. Today he shared a series of tweets that are worth sharing here. Each tweet highlights a different type of trader. More or less, each type is a way of defining ourselves as traders. And notice that they are also tied to a time frame.
Day traders: Can trade all day Love active trading Can make decisions quickly. Handle Stress Enjoy screen time Fast Reflexes Fast Platform
— Steve Burns (@SJosephBurns) February 19, 2015
Swing Traders: Buy weakness in an up trend Sell into strength Hold positions overnight Prefer a smooth equity curve Buy low & sell high
— Steve Burns (@SJosephBurns) February 19, 2015
Trend followers: Buy strength Buy breakouts. Follows the long term trend. Will risk bigger drawdowns for bigger profits. Let winners run.
— Steve Burns (@SJosephBurns) February 19, 2015
So how do you define yourself? Which one do you identify with? Keeping trades consistent with your methodology and holding true to your time frames will protect that identity. And at the end of the day, that’s who we are… and that’s worth protecting.
  Follow Andy on Twitter:  @andrewnyquist
No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
