Not to lose focus by defining what I want from trading

I seem to have taken up too many tasks in recent weeks.  I’ve spent a couple hours a day analysing, observing, and trading the forex market.  Another hour or so learning RapidMiner 5.  And then yet another couple of hours catching up with the news and various blogs.  All these on top of a full time job!

It has come to my attention that I can’t keep this up as I’ll be too burned-out and never actually able to get things done.  Such is the bane of choices.  Coincidentally, I read this blog post today (via TraderFeed) about the paradox of choices.  It is basically saying that having choices, per se, can have a diminishing rate of return (something which I’ve read elsewhere before but forgotten).  More choices isn’t always good and fewer can be better.  And studies have found that the diminishing rate is apparently pretty low.  Here’s a good quote from the article:

“we need to redirect the energies we waste flitting from possibility to possibility, into understanding what we really want in life and the trade-offs we are willing to make.”

Particularly at this early stage of my amateur quant career, there are many trading tools (analyzer, forecaster, scanner) that I want to develop and software (MatLab, RapidMiner) that I want to learn.

So what do I really want in trading by spending hours upon hours, day after day, studying, analysing, observing, and thinking?  The answer for me is fortunately easy to find (the benefit of keeping a good written record, i.e. this blog).  Referring to my own trading objectives that I wrote last year, there is just 5 points.

1. Application of independent and objective thinking
2. Understanding of capital markets
3. Prudent risk management
4. Identification of values
5. Study of quantitative finance

In practical terms, my ultimate goal in trading is to develop a trading system which requires no more than 1 hour a day of management time.  That doesn’t include research and development time, of course.  I am not trying to develop a holy grail system.  I am using the term system as in a set of processes for me to follow, not an algorithmic system.  Although that would be a tool for my system for sure.

Now that I’ve figure that out.  My first mandate is to reduce my paper trading in forex.  But rather than eliminate it completely, I’m going to increase the timeframe from 4 hour to daily.  Because trading the forex helps me understand the capital markets (#2 of objective).  Too much of it though would have been just for thrill and detract from my time for working in quantitative finance (#5).

If I’m to treat this as a part-time job, I need to have more discipline in this whole endeavour, not just in the trading itself.

Related posts:

1. Closed EUR/CHF and GBP/CHF Shorts: Best. Trade. Ever.
2. Barred from Trading at Work: A curse or a gift?
3. What to do when life gets in your way of trading?
4. Day trading report Jan 29, 2008: +$130