Forget money, time is our greatest asset

In financial markets we talk about time in terms of the time value of money, the speed to alpha, about annuity income and in terms of options trading about theta, or time, decay – and the list goes on ! However, when my fellow AlphaMind partner Steven Goldstein and myself coach and mentor a wide range of trader types, either directly or through our Trader performance programmes we regularly encounter traders with a mindset that rarely puts a value on ‘time’.

The reality for us all is that our ‘time’ is finite, it is without doubt the most precious thing we have. But we forget to preserve it, we often waste it and we are very good at not making full use of it. We tend to have more respect for money than time !

Take this example. Consider your trading day. Do you have it well defined as to when you are at your trading desk, and when you are not ？ Our evidence from real traders tells us many have no definition at all, many just roll out of bed, jump on screen and just sit, surprised 3 hours later that 3 hours has passed. And you would have read in our last AlphaMind article by Steven Goldstein, “Why it might be wise not to trade too much in the afternoon”that trading attention, decision making and market sharpness rapidly erodes as time passes, turning into screen-stare, irritability and poor trading decisions – negative edge in other words. We are at our most optimal just after a break or pause. Optimal time, when we are fresh and have clarity is both tactical and strategic for your trading edge. The best traders are those that have a specific time window for trading and stick to it. This allows them to have a much better work/life balance and gives them time to wind down effectively. It‘s a methodology that preserves your time. It’s about giving your time some respect. Giving it a value.

But time can impact trading in other ways too. A hedge fund trader I coached has a model driven approach to trading, well tested and mathematically sound. However, he was finding that trading was becoming stressful, not because he wasnt making money, but because it was time intensive. On analysing his trading journal from a trade timestamp point of view, yes, I said timestamp, it appeared that the average time for his forex based short term trades to achieve 100pct of their forecasted target was 90 minutes. We then looked closer at the trade alpha velocity by looking back at intraday charts. What we found was very interesting. We found that on average these trades were achieving 80pct of their forecasted target in an average of 38 minutes.

Based upon this information, which analysed approximately 50 trades, it was decided by the trader that 80pct profitability was still optimal and so he changed his targeting accordingly because he saw that the value of time released could be strategically advantageous.

In reality this had significant benefits. What he did by doing this was to free up time, on average freeing up c 50 minutes of his time per trade to do what he wanted with. Some days this gave him space to look for more market opportunities, other days he had time for Golf or for a bracing walk. The fact that his ‘time’ was no longer being squeezed by being too long in the trade gave him a calmer and more relaxed state which ultimately improved his ability to discover and make alpha.He had taken back control of his time.

So the lesson here is to be time smart. Consider your time, as finite as it is, to be the most precious asset you have. Look at what you do, how you do it, why you do it and consider the impact this has on your time. I guarantee you that you will be very surprised at how much time is spent screen staring, being too long in the trade, being tripped into daydreaming the hours away by dwelling on what could have been, by being stressed and perplexed by your own lack of process that is wasting your time and perhaps realising that your trading model itself is stealing your time.

And reflecting back on the hedge fund trader who tweaked his targeting to 80pct. Over a 3 month period he saved himself more than 100 hours of time, yep that‘s 5 days. And what’s more he made more money from having freedom to develop other strategies and felt that trading was no longer as intensive as it had been and he was thus less stressed! Creating time had created wealth.And helped his health too !

Be forever curious, look at your trading in ways that you have never considered before, look at the impact and use of time, you never know what benefits you might find !

As the saying goes “Time is money !”