Trading is a business. It has to be run like a business to be profitable. A lot of people make the mistake of thinking that they are just going to show up, open an account, and start chasing stocks around and raking in the money. That never happens.
There are many reasons that people fail at trading. I always point out that trading as a business has a fairly low cost of entry versus most other businesses. You don’t need to rent office space, buy a bunch of furniture, and hire employees. You need a good computer (we will talk about that in another Blog post coming soon). You need education (I recommend any of the Tradesight mentoring services…lol). I never understand how people think that they can just show up and trade with no real knowledge about how the markets operate, and of course, while there is a lot of free stuff out there, it isn’t the real stuff that is going to make you profitable. If the secrets to the markets could all be given away, well, then it wouldn’t be the market. The answer to life’s trading riddles cannot be found on Twitter. I always make the analogy of a person who wants to go to become a Doctor and says, “I think I’m going to perform a few surgeries, and then I’ll use the money that I make to put myself through Medical School.” That’ll go well. About as well as people that put their money into the markets without understanding how they work. If I had a dime for everyone I talk to that is sure that they are on the verge of greatness in the markets, but don’t know what the VIX is…
You need good software. There are plenty of free charting packages out there. There are real great ones that come with many brokerage accounts, and they will sometimes do in a pinch. If you think you are going to make money in the markets by using Yahoo Finance charts, good luck. This is a cost of your business, whether you pay your broker commissions to use their platform or you pay for the software monthly, as we do with eSignal.
The thing is, that’s about it. Those are the costs of starting up this business. Get a good computer (plus fast Internet/router, etc.), get the education to have a trading system, and get good software. To think that so much money can be made with so little investment is pretty amazing. That’s why I’m always shocked when people try to get into this business without making those minimal investments, and then they can’t figure out why the business wasn’t successful (HINT: You didn’t have a business). Oh, and one more thing. Get a good chair. You’re going to be sitting in it a lot.
But, like any business, it doesn’t necessarily mean that once you have that computer and software and education, you are all good for the next ten years. I upgrade my Internet speeds every chance I get. I’m now on the Cox Gigabit plan with massive upload and download speeds. What a difference it makes. Costs an extra $40 a month from what I had. That’s $0.04 on 1000 shares. Not even an issue. I upgrade my computer every 2 years or so. New technologies come out. Displays get sharper and faster. I spend about $3000 on the machine itself (not including if I buy new monitors). Divide that by 24 months and that’s $125 a month. $0.13 on 1000 shares. Again, not a conversation. Network routing speeds improve (no point in having Gigabit Internet speeds if your router or computer network card can’t handle it). I’ve been trading for 24 years. You’d think that from an education perspective, I would be done, and I probably mostly am. People ask me if I’ve read this book or that book by this trader or investor, and my general answer is no. I don’t really care what others are doing. My stuff works for me just fine, and I have other things to do, but, just to be clear, even after 24 years in the markets and certainly the last 15 of Internet trading, I still learn things from experience. I see things in a new light or I see something I hadn’t seen before. Rich and I have been toying with the Opening Range tool on stocks and using it in the afternoons…and it works. More to come on that later. But again, there are always things to learn. If you think “in six months, I’ll know everything I need to and will never have to learn anything else again,” well, that won’t be a successful business.
But when it comes to software, things never stop moving. Remember, your trading software is your most important tool. Think about a handyman. How many of them use Black and Decker drills? Not the good ones. The good ones have Makita or Milwaukee. Why? Faster, better, more torque, charge quicker, more reliable. In other words, everything they need to do their job as well as possible. I don’t care what you think…if you want this business to work, you are going to need good software that can put a lot of data in front of your eyes in the shortest time possible. And here’s the thing. Just like any other business, once you have it running, the thing you always want to improve is its efficiency. Good charting platforms are updated by their developers regularly to add features and tweak user interfaces. If your software isn’t updated at least once a year by the vendor, then that isn’t good software. If they fall behind the times, so will you.
I don’t care what you use for brokerage software or charting software, just make sure that it has the power to provide you with all of the real information that you need. It needs to give you an edge in trading. Computers are not going to take over the world of trading. Stop making excuses about black boxes beating you to the punch when your software reads “Last update: July 2013.”
And really, what I wanted to talk about today is that the part of this business that changes the most is the software. Some of that better be because the platform gets updated by the company that makes it, but some of it needs to be that you sit down on occasion and just think about your workflow and try to see if changing your layouts can help you become a better trader. As you learn more and more what you need to do every day, I promise you that how you set up your charts and watchlists a year ago when you started out is not the most efficient way for you to trade now that you know what the VIX is. I suggest that newer traders sit down at least once every 6 months and think about where every little thing is on their screen and consider whether it should be moved, deleted, changed, or added to. Even I do this once a year. I use eSignal for my charting, and I won’t make this an advertisement for eSignal, but it definitely is one of the most powerful platforms in the markets.
So here is an example of the vendor updating their software. Back in the naughts, eSignal was on version 10.6 for a while, which was a great platform for many years. You could save multiple “pages,” so I would have a page for stocks, one for futures, one for forex, etc. And each of those pages could obviously fill up my monitor or monitors however I wanted. However, if I wanted to switch from Stocks to Futures, I had to hit File…Load Page…and select Futures, and it would take about 30 seconds to close the one and open and populate the other. When eSignal 11 came along, they added the “tab” system. At the bottom of your screen, you can have separate tabs, and when you click on one, the entire desktop changes to what you created for that tab. But here’s the thing. They all are updating in real time, so as you click from tab to tab, you instantly have that layout showing and populated. This essentially means that you have infinite desktop space. I run 14 tabs, and my computer doesn’t chug at all. No more File…Load Page…wait 30 seconds, oh crap, I need to get back to my stock layout now. I don’t need six monitors any more because of a change that they made in the software. I use 2 HD monitors.
So that was a software update by the vendor that changed my world in trading. I can’t even imagine wasting 30 seconds to see what I need to see anymore. And this only happened in 2012! Another thing that I have changed from time to time is whether I integrate my broker’s software into eSignal. I’ve done it both ways in the past. It can be useful to have access to the order entry screen right in my eSignal charts. At the same time, in my broker’s software, I have to flip accounts from stocks to futures, and forex is a different thing completely now. So currently, I run my broker’s software on a completely different MACHINE. That’s right, not just separately on the same machine, but on a separate machine. Why? Because that currently works for me. I do it on a Microsoft SurfaceBook so that after the first two hours of the day, when trading slows down, if I have positions and want to monitor them loosely (without needing all of the data that I need to trade the active part of the day), I can pick it up and take it with me around the house and even out of the house. I like the freedom to be able to move around when I’m not in the most intense moments of the day. So that works for me currently. Maybe at some point, the user interface will change in a way that keeping them integrated will be so cool, I won’t want that. We shall see.
The other day, I added an additional tab with five charts (the five timeframes that we teach people to follow) that are linked together along with a Watchlist that includes the futures and market internals. This is separate from the screens where I already had my main stock screens. This is now a place where I can just throw up a symbol on a stock that I have a position in and leave it, and just click the tab every few minutes to see what is going on just on that stock. I can even duplicate this and run 10 of these and have 10 tabs dedicated to 10 different stocks that I’m playing with at the moment without affecting my main trading screen.
Do you have a main stock trading tab and what all can you fit on there? Can you fit more if you make the charts a little smaller in the way that you can see more information without killing your eyes? Does the order of things on the screen from left to right flow in a way that you can see everything you need easily enough? Are the right charts linked to the right Watchlists? On my main trading tab, I have a watchlist with the key indices (ES, NQ, etc.) and market internals (VIX, TRIN, etc.) linked to three charts (daily, 5-minute, 15-minute) with certain tools on each of those. I also have a Watchlist with the list of stocks that I trade frequently (the Generals) with my stocks from the report for the day linked to the 5 timeframes that I watch. So there, I can see easily everything that is going on in the markets while quickly keeping an eye on all key timeframes for the stocks I’m likely to trade. Once I enter a trade and get a partial, I can then put that stock on the 5 charts in the new tab I created and just go to that tab occasionally and use the main stock tab to keep moving forward on other stuff.
Think about how you set alerts. Sound or pop-ups? Reset after they pull back or no? Where do you put the Seeker/Comber so it doesn’t cloud up other stuff? How about the Seeker/Comber Watchlist tools on different timeframes on the Generals? Take 10 minutes and learn a completely new feature of the platform either by surfing through the menus or going to their on-line manual and reading something.
What works today might not work as well for you in six months if you find yourself trading the Opening Range plays more in futures than before, or if you start using the Pressure Thresolds or moving averages more. Sit down, think about your workflow, be objective, and see if there is a more efficient way to make your business work. That’s the job of the President of a business, and that’s you. I promise you, if you are sitting here in three years with the same computer, same software version, and the same screen layout, you are not going to be successful. You haven’t grown as a trader, and you haven’t invested in the business. Spend the money you need to start your business properly, and then from time to time, as your experience takes you to the next level, spend the time you need to make your business more efficient.