Here’s what to do when coming back to trading after a break…
The same principles apply whether it’s an extended weekend, or an enforced ‘trading vacation,’ like you may have had if you’ve been avoiding recent market volatility.
The thing is that it’s only natural to feel a little bit off-kilter when you’ve been pulled from your normal routine, even for a short spell.
The processes you use in your work that usually come second-nature can feel a bit ‘lacking’ and it can take a day or so before you’re fully up to speed again.
In many business environments this isn’t a problem…
For example, in a typical office role your productivity levels might not return to their lofty peak for a day or so.
You might have to double-check documents before signing off on them, and you might feel a mid-afternoon slump in energy levels a bit more than usual, but it’s probably fair to say things aren’t affected too badly.
But compare that to trading…
Fuzzy-headed thinking presents the trader with a variety of immediate dangers.
And I speak from bitter experience!
Here are a few that spring to mind:
- “Fat Finger” trades can have you mistakenly trading in multiples of your usual size. One time I meant to place a trade at £3 per pip but double-tapped the key on my keyboard and just didn’t spot it. Result: trade filled at £33 per pip instead! I was happy to take a quick £90 loss on this one rather than risk trying and get out at breakeven. It could have been a loss of even greater magnitude if the market moved immediately against me.
- Trading “upside down”. This is where you’re merrily trading away and place a market order the wrong way around – buying instead of selling, or vice versa. And it’s easier to do than you’d think. You can be focused so intently on shaving a few tenths of a pip, and getting filled at the very best price, that you completely overlook that the order ticket is still set on its default ‘Buy’ setting.
On one occasion I thought I’d covered a long position in the T-Bond futures by selling 2 contracts. What I’d ACTUALLY done was buy another 2 contracts to double up on my position! I wandered off to make a cup of tea and casually strolled back to be met by a surprise profit windfall, although it could easily have been a total disaster.
- The daydream. Have you ever suddenly stopped what you are doing to wonder why on earth you are doing it? It usually comes with processes you know very well, the kind of things you’d usually do on autopilot. An off-peak state can sometimes create ‘interesting’ applications of your normal routines…
Ever drive straight past your turn in a bit of a daydream (or drive home from work to the house you moved out of 6 months ago)?
Well this is the trading equivalent. It can sometimes feel like you’ve not been completely present for the last 5 minutes and you end up staring confused at out-of-synch analysis someone else has drawn on your chart (because it couldn’t have been you, surely!).
Trying to apply 1-minute scalping analysis to a daily chart (forgot to change the timeframe setting) and then scratching my head for 5 minutes over why it all looked a bit odd is one situation I personally recall.
So those are a few situations you might stay aware of when you’re returning to the screen after a break, and if you’ve been trading for a while I’m sure you have your own tales to add to the list too.
Now it’s one thing to be aware you probably won’t be at the top of your game the first day back, but, the show must go on, so how best to handle this situation?
Here’s what I think you should do:
How to get quickly back on track after a break from the markets
- Catch up quickly. Give yourself a quick overview of what’s been moving the markets, any common features players are watching (big support levels etc…) and a feel for the directional bias on the timeframes you trade. The picture can be completely different today than it was when you last looked, even if you were absent for just for a day. Many brokers issue a daily analysis bulletin which are worth reading. I’m not suggesting you trade using their specific suggestions, but their analysis work will help you get a feel for what the market is watching and what is likely to move price.
- Prepare carefully. It’s your first day back at the screen so do prepare meticulously. Double-check you’ve gone through the items in your pre-trade routine correctly: check the accuracy of any price levels you use and know the times of any economic news releases. And if it’s the first day back after a widely observed holiday (Christmas, New Year etc…) be aware the market in general will be re-entering positions. Institutional traders that lightened their holdings over the holidays will be looking to re-balance things and their activity can create unusual price action.
- Ease in gently. Take everything slowly: remember that mentally you’re probably still in holiday mode for at least the first hour or so. Give your trader’s mind chance to sharpen up again – maybe trade at smaller size than usual for the first couple of hours (or for the first day entirely if you prefer). And definitely double check the details on your order ticket before pulling the trigger. Remember, no fat finger trades or upside down entries!
Just be sensible on your return and you can be back up to full speed in no time.
There’s no rush, the next trade is always just around the corner.
And, most of all, don’t let a fear of ‘missing out’ mess with your decision making. Look at it the other way around and take care of the potential downside: step back in to the markets only when it suits your appetite for risk.