Trading Thoughts - Trading vs. Planning

I was speaking to my fiance yesterday and she asked me how my trading was going.  I told her that I was pretty productive this weekend and I made a lot of progress towards getting organized and developing my trading plans.  She responded by saying that it seems I spend a majority of my time planning instead of trading.  This comment really made me think.  Should traders spend more of their time trading or planning?

Now I want to make it clear that when I say planning, I am not referring to a trading plan.  A trading plan is critical and you should not be trading live without one.  When I say planning, I mean scheduling out tasks and procedures such as what you are going to do for the day, how you are going to backtest an idea, what books you are going to read, etc.  For instance, I spent time this past weekend revising my daily trading schedule.  I needed to update it in order to make sure I was getting the most out of each day.  I also want to create a weekly schedule because there are so many trading related activities that I cannot fit all of them in everyday.  So I need to put time to creating a schedule to ensure that each week I am accomplishing all my objectives and covering all the areas of my trading activities.  This is what I am referring to when I say planning.  This task would be so much easier if I had a boss or coach devoted to scheduling my time in order to maximize my performance.  Since there is no such person, the responsibility is solely mine.

Trading vs planning is a difficult argument because there seems to be a balance between the two.  If you look at the extremes, neither option is good.  You would never want to spend all your time planning without trading because you can become lost in the search for the holy grail as well as become somewhat disconnected from the live, psychological action of the market.  On the flip side, it would be a terrible idea (and costly) to spend all your time trading without a plan because your actions would most likely be dominated by emotions and plus you would have no way of evaluating your performance against a specified benchmark or plan.  Therefore there must be a balance between the two.

This topic is probably less difficult for those lucky individuals who are trading full time.  Unfortunately for me, I  have a full-time job in engineering which takes up most of my week.  That leaves me with only the morning, evenings, and weekends to work on my trading.  There is little room for error because my free time is at a minimum.

Personally, I lean towards mechanical system trading as opposed to discretionary trading.  I believe that a majority of my time is well spent researching and testing methods to apply to the live market.  At the same time, most of my ideas come from either trying to trade the market are watching the live market throughout the day.  I do believe in performance evaluation, so i think it is critical to have some guidelines.  I don't think you can strictly evaluate performance by looking at your PnL statement for the day because there are many other factors that determine if you traded well.  I also believe in having standard procedures for researching topics, so time must be spent on these procedures.  Once they are in place, it makes researching a more efficient process and ultimately save you time.  One final note, I believe a plan is critical because it lays out a path to success.  In trading, one day I feel like i am gonna be a millionaire, the next day I feel like I am back at square one.  With a plan in place, I can feel a since of accomplishment regardless of if the outcome is profitable or not.  I believe that goes a long way to preventing burn out and hopelessness.

While planning is necessary, it is important to remember what you are planning for and that is why trading (whether sim or live) is important.  It would be like training for a race that you never run, it would be very easy to lose sight of your goal.  This is why it is necessary to also get as much screen time as possible.  It helps you familiarize yourself with your trading products.  It will also provide countless ideas for trading indicators and systems, which provides more ammo for your planning.

I guess what it all boils down to is loving the process.  Whether it is trading or planning, as long as you love what your are doing the rest doesn't really matter much.  When it becomes a chore or a burden, then something needs to change.  There should be something besides money that drives you to pursue a path to successful trading.