How much time do you spend on trading?

How much time is needed for trading, researching ideas and studying?

Significantly less than what you’d think. Everything I do is end of day, and everything I do is systematic. So to give you an idea, I use Interactive Brokers as my main short term trading broker and SelfWealth for longer term systems. I also use RealTest with Norgate Premium Data as my key software. I can actually place my account balance into RealTest, push a button, and it will automatically calculate my position size and place my orders into Interactive Brokers, and that is it. Literally takes me thirty seconds. It’s longer to turn the computer on than it is to actually place the orders. Once they’re placed I don’t have to do anything. I just have to repeat that process each day. That’s all I have to do. The hardest thing is repeating the process.

For my trend following strategy, I do the same kind of thing. It’s pretty easy to calculate your position size. 5% of current capital, place the order, and away I go. So my actual trading is less than ten minutes a day. Don’t get me wrong, it’s taken me over 20 years of testing and programming to get it to that point.

In terms of researching, that’s constant. I’m always thinking about it. In the past one of our portfolios had been really struggling in the Australian market over a few years, and we had to look at how we could fix that and turn it around.

How can we make a trend following strategy or a momentum strategy perform better during a sideways market, without actually rebuilding it form the ground up? Those are the kind of things that we’ll spend time researching. We run two short term mean reversion systems in the U.S. market. One was introduced back in 2010, but last year what we wanted to do was take that strategy up a notch. It does very well. I think this year that strategy is up 38%.

What we wanted to do was make it a lot more consistent. The team and I got together and the whole idea was to take this short term strategy and make it even shorter term, and make it trade a lot more. What that did was enable us to be a lot more consistent with the profitability. Instead of having 65% profitable months, we go up to 83% profitable months. What we’ve kind of developed is our own house at the casino. The house at the casino has a very small edge, and the goal is to replicate that edge as many times as they can.

We’ve got a very small edge. Now what we want to do is replicate it as many times as we can. The good thing about that is the consistency allows you to come out of draw down a lot quicker than a trend following strategy. You don’t have the trade frequency with the trend following strategy, and as a result if you go into drawdown, it will come out eventually based on exploiting your edge. Because your edge doesn’t get exploited that often, or not as often as you’d like, it takes longer to come out of drawdown.

In our experience, the average mum and dad in the street want a lot more consistency with their profitability and one of the ways to do that is increasing your trade frequency, which is what we’ve done.

What to do when you’re sitting on the sidelines?

We call it “sitting in cash”. This is when, for example, your trend systems have determined the market is now in a downturn and you have cashed out your positions.

When you’re sitting in cash, it’s a great time to be studying and researching. If you are really serious about studying and want to design and code your own trading systems then you might consider the Trading System Mentor Course.

Alternatively, The Chartist has loads of courses, videos and articles in our Members area. You get access to these with a free trial membership including access to our new Beginners Guide to Building Training Systems.