I typically trade about 10 days per month to a schedule laid out as much as 6 or even 12 months in advance. Some friends asked me recently how I decide upon my trading schedule. What is the formula? How did I arrive at it?

So I agreed to write an article explaining all of the ins and outs of a subject which is more important than many traders realise. Here it is, the answer, the formula and the logic underlying it…

The premise

We can’t physically trade every hour that the markets are open, so we need to decide how much of the available market time we are actually going to trade. We also shouldn’t want to trade every available hour. Aside from being intensive work that is tiring, the reason we are in this business is to provide flexibility for a better work / life balance. It is all too easy to lose sight of that fact!

So we need to set a plan that suits our personal needs as well as having us concentrate on the most productive trading days as far as possible, or at least those days that are most likely to be the best trading days over the long run.

My answer

First I will give you my own answer to this riddle and then work back through how this is arrived at. My conclusion is to trade no more than 12 days per month and no fewer than 8. These days must be selected and planned well in advance and not just drifted into based on how you feel when you wake up each morning!

That is why I know my trading schedule months in advance. I then stick to that schedule with cast iron discipline. There is no point having a well thought out plan if you don’t then stick to it, is there? The only deviations, which are extremely rare, are due to unexpected events.

As an example, here is my own schedule…click here

The formula

There are three items that go into this formula each of which results in eliminating certain days from the annual calendar and what we are left with is our personal trading schedule for the year. The three items that lead to days being eliminated are as follows:

• The days of the year that are least likely to be productive in general
• The days which statistically are less reliable for our own trading strategy
• The need to take regular breaks from trading, to rest as well as to enjoy life

Step 1

So first we eliminate the days each year when the odds do not favour success, or at best when profits can be expected to be below average making these days poor use of our valuable time. These tend to be days when we know ahead of time that volume is likely to be light. This is the list I like to use:

• The day of and the day preceding: Martin Luther King Day, Presidents Day, Memorial Day, Labor Day.
• The day of: Good Friday, Easter Monday, Columbus Day, Veterans Day.
• The day of and the day after: Independence Day.
• The day of, the day preceding and the day after: Thanksgiving.
• The whole period between and including Christmas Eve and New Years Day.

Step 2

The second step is to examine our own trading strategy to see if there are any statistical tendencies that we should be aware of and hence respond to. Some years ago I analysed no less than 5 years worth of short-term trading results to look for clues, somewhere of the order of 1000 days of data. I discovered something interesting.

When I broke the profit over the 5 years down by days of the week I found that profits were distributed approximately as follows:

• Monday -10%
• Tuesday +35%
• Wednesday +30%
• Thursday +30%
• Friday +15%

There is some powerful ammunition here. Until I did the analysis I had no idea that Monday’s were so bad. There were plenty of great Monday’s in the sample, clearly enough of them to disguise the long-term reality from me! Guess what – I never trade on Monday’s today and haven’t done for several years!

Friday’s are still profitable, but far less productive in terms of “earnings per hour” than the remaining three days of the week. Therefore as a general rule I tend not to trade on Fridays either. This is not as absolute as my hatred of Monday’s and I do trade a few Fridays each year – usually the first Friday of the month (Payrolls Friday). Fridays for me are used primarily to backfill my calendar to ensure I am able to trade enough days during months that are shortened by other factors.

Interestingly Mondays and Fridays also tend to be the lower volume days of the week, hence the findings here were consistent with the same logic for eliminating the set of days in Step 1.

Step 3

The final factor to consider is the need to take regular short breaks from trading. Quite apart from the importance of having a family life outside of the very intensive career we choose, it is extremely important to switch off, relax and recharge the batteries at regular intervals. Trading is extraordinarily tiring compared to any other occupation that involves sitting at a desk, staring at computer screens and swearing at them occasionally!

If you don’t get regular rest from this you slowly but surely lose your effectiveness. You can prove this to yourself by literally taking a week off and seeing how much more alert and attentive you are on your first day back. So this isn’t being lazy. This is a critical element in a long term and successful trading career. Yet you would be surprised how many traders try desperately hard NOT to take time off! We are brought up to believe that the harder we work, the better we will succeed. Well in my experience quite the opposite is true when it comes to trading. You need a razor sharp mind, absolute concentration and unshakable discipline – all things that start to be eroded as you tire from working too many days without a decent rest.

So my personal recommendation is to take off a good 7 to 10 days at least once per quarter, but ideally more like every other month.

Discipline

This formula is simple enough, logical and makes sense. But another value to having a schedule to work to is that it brings another element of discipline into your work. Unlike following a trading plan, avoiding over trading etc. this is a discipline that is much easier to stick too. Discipline in everything improves the more you are able to be disciplined in a few things. It becomes more of a habit and slowly becomes easier to be more disciplined in general. So it is constructive to have a few plans to follow that are easy! Working to a well thought out schedule each year is a simple plan to follow as well as having real value in improving trading performance.

Is my plan the right one for you? Maybe, maybe not. If you like the logic and it sits well with your view of life and your personal circumstances, by all means copy it. If not modify it to better suit your own needs. But I do urge every trader to have his or her own plan and to follow it. This is a serious business and the days you choose to trade deserve more thought than just how you feel each morning when the alarm clock goes off!

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