StockTickr Trading Journal Blog » General

Follow the Trend or Reversion to Mean? You Decide

Dave — Thu, 18 Feb 2010 13:07:43 +0000

A few weeks ago I read Paul Kedrosky’s post on how contrarianism is a fad and how he thinks that most contrarians are just posing for the camera. Jason Goepfert wrote a nice rebuttal (with an eye-catching title) about how there’s good reason to be a contrarian in certain situations. He used an example of the S&P 500, but how would the strategy work for individual stocks? You rarely see the types of forceful moves in the overall market that you do in individual stocks almost every day. Surely these types of moves generate some follow through.

I’ve done some backtesting in this area. So given this universe of stocks:

Price is between 0.50 and $60
Average volume is above 100,000
Volume on trigger day is greater than 2,000,000
The range on the trigger day is greater than 20% of the stock’s price
Volume on the trigger day is at least 50% above average volume
Closes at least 10% higher than its 10 day moving average

Here’s an example of ENT a few days ago:

(Chart generated by the StockTickr Trading Journal)

So my question for you: Is there a trading edge on the long side or the short side after these types of moves?

What’s your guess? Let me know in the comments below.

TraderInterviews Talks with Joey – Downtowntrader

Dave — Fri, 29 Jan 2010 13:55:44 +0000

TraderInterviews.com has a great interview with the Downtowntrader, Joey Fundora. He gives some very detailed information about exactly how he trades including his various strategies, the tools he uses to scans the market, and the trading journal he uses.

Tim Bourquin is a masterful interviewer as always. Nice interview, Joey!

Should You Consider Re-Entering Trades That Have Stopped Out?

Dave — Mon, 25 Jan 2010 14:59:17 +0000

There are many ways that trading can frustrate you, but one of the most frustrating situations is when you get stopped out of a trade only to see it continue in your direction. It could have been a very profitable trade but you were stuck with a loss. Here’s a trade I took in CRM that shows this exact situation. I was stopped out by a few pennies only to see the stock continue down:

A lot of traders will take a stock completely off of their radar after they’ve had a loss in it – that’s understandable. What’s the only thing that’s more frustrating than taking a loss in a trade? Taking two losses in the same stock.

That said, it could make sense to keep those stocks on your radar to trade again. The problem is determining whether it makes sense to take the trade if a setup occurs after you’ve been stopped out already. When you re-enter trades, you’ll undoubtedly be stopped out a second time periodically. This can be psychologically difficult to endure and this situation often weighs more heavily in your mind (“Why didn’t I learn my lesson the first time I was stopped out?”).

The StockTickr Trading Journal provides a great way to keep track of this using tags (a.k.a. categories). Tagging your trades in your trading log lets you track and analyze subsets of your trades. When I started re-entering trades that I was stopped out of, I would assign those trades the tag “ReEnter”. This allowed me to compare how these “ReEnter” trades were performing compared to my trading system overall.

After accumulating several of these trades over time, it turns out that these ReEnter trades were outperforming the system overall – in fact, they were significantly better than average. These results were telling me that for this particular system that I trade, re-entering trades made a lot of sense – even if it’s psychologically difficult. Having this type of data available to analyze certainly makes it easier to take trades where your fear is telling you not to.

Will you re-enter trades in your system? I’m interested in hearing what others have to say about this practice.

7 Ways to Improve Your Existing Trading Strategy

Dave — Wed, 13 Jan 2010 16:17:39 +0000

Let’s say your trading is going pretty well – you’re trading a good strategy that you’re making consistent profits from and you’re comfortable with. Good traders never rest on their laurels, so you’re ready to take the next step. The existing strategy you trade never consumes all your buying power, so you’ve got some capacity for an additional strategy.

So what’s your next step? Research a completely new trading strategy, right? Not yet, I say. If you are already trading a profitable strategy, many times there are ways to improve, adapt, or add on to it to make more profits – sometimes a lot more. So before investing a lot of time in developing a completely new strategy which can be a long and arduous process, first look at the strategy you already trade.

This has a couple of obvious advantages – you’re already intimately familiar with how your system works and you already have a mountain of real, live trading data to test with which is always more valuable than pure backtesting with is 100% theoretical.

Here are some ways to look at your existing system to try to improve it:

Use a Profit Target – Look for ways to add a target order or modify an existing one. Targets are great for a lot of strategies because they lock in profit and they free up capital sooner.
Adjust Your Stops – Most traders use stops that are too tight. Look at your existing strategy and see if you can make more money by using a larger or smaller stop distance.
Find More Opportunities – If you’ve already got a profitable strategy, it often pays to relax your filter rules to generate more entry signals. Even if you end up with a strategy that is slightly less profitable per trade, the increased opportunities could be well worth it.
Look For Fewer, More Profitable Opportunities – This is the opposite of the previous item. It might make sense to trade fewer but more profitable opportunities by tightening your entry criteria a bit. Often times you’ll find that you can make the same amount of money with fewer trades (and therefore less risk). This can free up valuable buying power to allocate to other strategies.
Automate your Strategy or Part of It – How are you spending your time when you trade your strategy? Are there aspects of that routine that could be streamlined or eliminated? Perhaps the strategy could be completely automated. Maybe the strategy can be modified slightly to be automated.
Look For Cheaper Commissions – If you’re trading big enough, this could save thousands of dollars a month. Changing brokers can be a pain, so make sure the pay off is going to be worth it before going through the hassle of moving money, learning a new platform, etc.
Backtest Losing Trades in the Opposite Direction – Let’s say you’re trading a long strategy and 40% of those trades end up stopping out. What would happen if you took those trades that stopped out and traded them short? Think about it – the trades that stop out have invalidated your long “thesis” with your original strategy. Maybe there’s an edge on the short side with those trades.

Have you found any of these to be fruitful in your own trading? Which was most valuable? Any other approach that you’ve found helpful?

Giving Talk at Las Vegas Traders Expo

Dave — Wed, 28 Oct 2009 13:18:05 +0000

I’m scheduled to give another talk this year on automated trading at the Las Vegas Traders’ Expo. I’ve heard from a handful of users that they will be at the expo and we’ll be meeting up there. If you’ve never been to the expo, I’d highly recommend checking it out. There are a lot of speakers who you’d recognize giving talks on a whole variety of trading topics – definitely something for everyone.

Here’s a free signup link if you’re interested in attending.

My talk is called Automated Trading with the Odds In Your Favor and will be bright and early on Saturday, November 21 at 8AM. It will be a modified version of the talk I gave last year, so even if you saw it last time there will be some new stuff to see.

If you are attending and would like to meet up, definitely drop me a line and let me know.

Interview with Scott Andrews from Master The Gap

Dave — Wed, 12 Aug 2009 10:38:02 +0000

For the next interview in the StockTickr Interview Series (RSS feed), I spoke with Scott Andrews from Master The Gap. Scott trades the e-minis using a unique style that he devised on his own through years of backtesting and trading experience.

Read on for a great interview and learn more about how Scott trades, the types of setups he’s looking for, and how he got started trading.

StockTickr: Tell us a little about yourself, Scott.

Scott: I grew up in rural Virginia and now live in Cary, North Carolina with my wife and four daughters. I attended the United States Military Academy, most commonly known as West Point. After graduating in 1987, I served as an Aviation officer and helicopter pilot. Serving in Operation Desert Storm was enough for me to realize that I loved the Army and flying, but not enough to make it career. So, I left in pursuit of a more family-friendly lifestyle.

My first job was selling laboratory products and chemicals to scientists. It didn’t take long to realize that they weren’t interested in hearing my “war stories”; they just wanted to find and buy what they needed as quickly and efficiently as possible. So, in 1995, I co-founded a company called SciQuest.com and launched one of the Internet’s first business-to-business web applications. In a nutshell, we created an Amazon.com shopping experience with about 2 million laboratory products and chemicals for scientists that integrated with an organization’s procurement systems.

StockTickr: How did you get started trading?

Scott: I had the privilege and good fortune of taking SciQuest public on the NASDAQ exchange in 1999. It was during these crazy times while interacting with analysts and institutional fund managers that I gained a unique, front row seat of how the markets worked. However, it was the extraordinary moves in our stock price, in both directions, that sealed my interest in technical, short term investing.

After stepping down as CEO of my prior company in 2001, I started looking at a variety of different entrepreneurial ventures for my next career. In fact, over the course of a 6 month period I conducted a very extensive personal analysis comparing my financial goals, skills and resources with the needs and opportunities of a variety of different business opportunities.

After failing to find a match that motivated me, it struck me to consider trading for a living as business venture. The thoughts of no employees, no travel, maximum time with my family, minimal investment, and unlimited financial potential were attractive to say the least. But I also knew that my genuine, life-long interest in the markets combined with a mathematically and risk oriented personality would likely serve as a great foundation for this career change.

When this light bulb went off in my head, I committed 110% to becoming successful as a full time trader. The only concern I ever really had was how long it would take me to achieve consistent profits and how long my wife would continue to support me and my new passion. Thankfully, she was patient.

StockTickr: Most traders have a horror story about losing their shirt when they first started trading. What’s yours?

Scott: I had surprisingly good success at first and even made a profit trading my first year. But then I increased my trading size and soon my average size winner was dwarfed by my average size loss. Every time I had a winner, I found an excuse to take profits prior to my originally planned target. I gave back all of my first year profits (plus a little more) in the 1st quarter of my 2nd year.

It was a brutally tough and humbling experience for me, but I learned a lot and was fortunate not to lose more. It was also a great catalyst that forced me to evaluate my strengths and weaknesses, as well as my financial and lifestyle goals. This self-evaluation resulting in me focusing all of my efforts and energy on the opening gap – a setup that generates plenty of profit potential, minimizes discretionary decision-making, and is easily back-tested.

StockTickr: Do you trade for a living now?

Scott: Yes, I trade for a living, mostly focused on the opening gap. I also run an educational site (www.masterthegap.com) that I started in 2007 where I share my research and help traders profitably trade the opening gap.

StockTickr: What single lesson did you learn along the way that has helped you the most in your trading?

Scott: The biggest lesson for me was realizing that I did not need to change “me” to be a successful trader. I simply needed to find the setup, timeframe and approach that best suited for my personality, and strengths and weaknesses. Too many new traders have it backwards; they get drawn to the promise of profits and try to adapt their personality to trade that technique profitably. Speaking from experience, that normally only results in extreme frustration and confusion and ultimately, losses.

StockTickr: Describe your style of trading.

Scott: I focus my personal trading primarily on fading the opening gap in the US futures indices (i.e. S&P 500, Dow, Nasdaq 100, and Russell). At the heart of my gap strategy are “zones.” I use these to segment and organize the various gap setups into groups that may exhibit similar trading patterns. I use the prior day Open, High, Low, and Close and prior day direction (up or down), in conjunction with market trend, seasonality and daily price patterns to determine whether to fade the opening gap or not.

Though my signals are a based upon a strategy system that I’ve created in TradeStation, I manually execute the orders. On average I trade the gap about 2 times a week. I dabble with day trades during the opening hour and the close on occasion, but my real edge and “bread and butter” comes from trading the gap.

StockTickr: What’s your exit strategy for winning and losing trades?

Scott: I generally target gap fill or beyond and use a stop equal to roughly 30% of the 5 day ATR (Average True Range). Since all of my plans have a pre-defined profit expectancy, I simply let the historical probabilities work and I am either stopped out or have a nice winner.

StockTickr: What 3 books do you recommend traders read? Other than your own, what are your 3 favorite blogs?

I recommend Mark Douglas’ books (The Disciplined Trader or Trading in the Zone), Trade Your Way to Finanicial Freedom by Van Tharp, and Market Wizards by Jack Schwager. To be honest though, I have read nearly a hundred different books on trading and have learned something from each of them, but the most important ones are about the psychology of trading.

My favorite blog is TraderFeed by Brett Steenbarger. It’s the only one that I read routinely.

StockTickr: Do you think one day computers will make better traders than humans and has that day come already?

For the average person and trader that day is already here. Most folks will not be able to tackle the psychology and complexity of discretionary trading and are better off following a system with rules. I am one of those people.

StockTickr: What technical indicators could you not live without?

Scott: A Japanese candlestick is the only one. Other than that, I prefer price action and patterns. Most indicators are grossly over-rated, easily mis-understood, and improperly used in my humble opinion.

StockTickr: How do you think the market has changed over the last several years? How have you adapted?

Scott: Huge expansion in volatility of course. I had to move to an average true range (ATR) based system for stops in order to accommodate the volatile action of the past couple of years. And this has made position sizing a little more complex, but manageable.

StockTickr: Do you backtest and if not, how do you instill belief in your system?

Scott: All of my signals and gap trading decisions are based upon historical probabilities that I’ve identified through extensive back-testing. I trade much more profitably and patiently when I know that I have a historical edge backing my setup. Otherwise, my personality is such that I tend to over-manage and tinker with my trades – normally resulting in cutting my winners short and riding my losers, a terrible combo!

StockTickr: What advice can you offer traders who are just starting out?

Scott: Know thy self. Find that single market, setup and time of day that best fits your personality and then focus, focus, focus! Way too many newbies waste a bunch of time chasing the lure of money and the next great idea. There are lots of ways to make money consistently in the markets, but none of them can be found without an objective self-assessment and serious focus, effort and analysis.

StockTickr: What do you like best about trading?

Scott: I love the freedom and control over my own life that it provides. There are an unlimited number of ways to make and lose money trading the markets. One of the surprising benefits for me has been the ability to use my creative side to invent new ways to take profits out of the market. This is truly exciting and empowering for those that have the stomach and means and interest.

StockTickr: Thanks for your time, Scott.

Scott: Thanks, Dave.

There is now a risk free trial for StockTickr Pro – hone your trading edge and become consistently profitable with StockTickr.

Previous interviews in the StockTickr Interview Series (RSS feed)

Do you have suggestions for other traders you’d like to see an interview with? Let us know!

Is Your Trading Streaky? You Might Be Able To Profit From It

Dave — Thu, 12 Mar 2009 19:27:31 +0000

I’d bet that if you asked every trader if their trading was “streaky” – the vast majority would say yes. Every trader goes through dry spells and periods of nice profits. But if your trading is TRULY streaky you would be able to improve your system by modifying it slightly to skip trades or at least modify your commitment to certain trades (reduce position size).

Let’s say you have profitable and losing trades that tend to occur in streaks. If you could determine that the streakiness was statistically significant, then during a string of losing trades you could back off your position size or pass on trades until you see one that would have been profitable. Once you encounter a profitable skipped trade you could start trading again.

If the trades in your system are negatively correlated (that is, losing trades tend to be followed by winning trades and vice versa) you could potentially set up a rule to do the opposite.

I’ve recently added a streakiness report in StockTickr that will calculate this correlation statistic for you based on anything you choose to filter on (tag, date range, dozens of other filters).

It turns out that there are fewer systems that are streaky enough to profit from than you might imagine. At least in my experience, there were only a couple out of the dozen or so systems that I’ve traded that showed any promise at all for this streakiness.

I’d be interested to hear if anyone out there has implemented a rule such as this to try to improve their trading system. How did it turn out?

Interview with TraderAM

Dave — Mon, 02 Feb 2009 14:20:23 +0000

For the next interview in the StockTickr Interview Series (RSS feed), I spoke with TraderAM. TraderAM is an independant day trader who has an interesting style of trading and posts all his trades on his blog. Feel free to ask him questions in the comments section below.

Read on for a great interview and learn more about how Amarjit trades, the types of setups he’s looking for, and how he got started trading.

StockTickr: Tell us a little about yourself, TraderAM.

TraderAM: Born in the UK and have lived most of my life here apart from a 3 year stint in Canada. On the education front, I did a University degree in Biochemistry, I didn’t follow that thru as a career and went into the IT and Computer Industry instead. Pretty much most of my working life has been in IT Software development which I still do currently as full time employment. Enjoy golf, science fiction, marine aquarium hobby and family life.

StockTickr: How did you get started trading stocks?

TraderAM: I became interested in the stock market while at University when I went on some general information seminars. But it was only later (1999-2000) when I had an opportunity to actually think about trading for real. As you know this was the time of the tech boom and IMO it was also the start of online trading coming to the fore. These two factors combined to produce the incredible market conditions we experienced. Looking back, I was not really “trading”. I didn’t look at charts or consider stops and losses, I was just jumping on the momentum bandwagon like everyone else and making lots of money which all seemed so easy..lol.. The buzz of trading during this time and the desire to learn more about how the markets work, got me hooked.

StockTickr: Most traders have a horror story about losing their shirt when they first started trading. What’s yours?

TraderAM: By nature, I’m not an aggressive trader, so I haven’t really blown a big account as such. In fact I probably missed out on the biggest gains in the tech boom as they occurred after I had moved most of my money out of the trading account for mortgage and car etc. The remaining 15% or so, I naively believed that I could build up again quite easily. Then came the tech crash and so I suppose you could say I “lost my shirt” as that disappeared quite rapidly.

StockTickr: Do you trade for a living now?

TraderAM: No. I still have my full time job. But being around computers all day, the flexibility of working hours and also the fact that the US market is open 2:30pm to 9:00pm UK time means that I can normally trade on most days.

StockTickr: What single lesson did you learn along the way that has helped you the most in your trading?

TraderAM: You have to find both a strategy plus a timeframe which makes you comfortable and you have to stick with it to allow it a chance to work.

StockTickr: Do you keep a journal and do you consider good record keeping essential to your success?

TraderAM: Yes and Yes. It is only by doing this that you can judge your performance, see if the strategy is underperforming and see if you are deviating from your trading plan.

StockTickr: Describe your style of trading. How long do you typically hold stocks?

TraderAM: I trade off the 15min chart, using primarily candlestick price action setups on stocks which have gapped. I am looking for setups such as range breakouts, price action at s/r levels and pullbacks in trends alongside staying on right side of the general market. I am always aiming to hold part of my position until end of the day as that way I can catch the most of a move if a stock starts to trend.

I owe some thanks to TraderX as my strategy is based on his with some of my own modifications added to it.

StockTickr: What’s your exit strategy for winning and losing trades?

TraderAM: Whenever I enter a trade based on a candle setup, my initial stop is usually at the opposite end of that candle. I move my stop to breakeven once I am up 1R. In terms of exits, it varies depending on market conditions, but generally I take partial profits at Fib Ext levels, 1R, 2R , $1 gain (whichever one seems more appropriate) and the rest I exit at the end of the day if it is still open.

StockTickr: What 3 books do you recommend traders read?

TraderAM:

StockTickr: Other than your own, what are your 3 favorite blogs?

TraderAM: The blogs I read (see my blog for links) are all very good and I try to visit them most days if I have time. But if pushed to name 3, these would be (no particular order):

StockTickr: Do you think one day computers will make better traders than humans and has that day come already?

TraderAM: A quick answer might be yes as they would be better than humans at performing mechanical tasks since no emotions are involved (e.g. obey stop losses, let profits run etc). However I would say no. Any computer system will have been designed by a human initially and as such has some human ‘influence’ already built in. The market is driven by greed and fear and as long as humans are involved it will always be so, any computer system will have an impossible task of trying to find order in this mass. I hope that is the case anyway, as computers are pretty boring beasts.

StockTickr: What technical indicators could you not live without?

TraderAM: I trade more off price action rather than indicators per se. However the ones I do use are: ema, CCI, volume,atr. More as supporting factors rather than decision makers.

StockTickr: How do you think the market has changed over the last several years? How have you adapted?

TraderAM: Hard to say over that timeframe as I have only followed the markets day in day out for last couple of years when I started trading “properly” with a definite trading plan. At a basic level they are still driven by the same forces (supply and demand) so from that point of view they haven’t changed. In terms of character: the market for most of 2007 and 2008 was not moving as much as say in Tech Boom days, so that is one aspect. All that changed in last quarter of last year when volatility came back big time. In terms of adapting during this time, I have forced myself to trade less, be more critical of my chart patterns and try to only take the very best looking setups.

StockTickr: Do you backtest and if not, how do you instill belief in your system?

TraderAM: Yes, Backtested then paper traded before going ‘live’. I also continue this going forward and backtest any modifications to my strategies and any new setups that I build.

StockTickr: What advice can you offer traders who are just starting out?

TraderAM: Learn about Money Management so you don’t lose your shirt. Learn discipline so that you can stick to your trading plan to give it a chance to work. Keep in mind that you only need to be successful 50-60% of the time to make decent profits. Don’t take a strategy from any blog/forum and expect it to work. You have to work at it yourself and better still try to take the best bits of it and add things which you have found in your own study of the markets. It is inherently human that when you have built something yourself, you will have more confidence in it and will be more likely to stick with it.

Unfortunately, trading is going to be painful, there will be days when the market kicks you and then kicks you some more when you are down. If you know that from the outset then you can steel yourself to it. The key is to just take it but stay in the game over the long term (hence money management) until you become more successful. Remember, it is a marathon not a sprint.

StockTickr: What do you like best about trading?

TraderAM: The buzz and satisfaction you get from good trades which you have executed to plan and kept your discipline. Also freedom that it gives you to enjoy other things in life, when you can do it fulltime successfully (which I hope to do at some point in future).

StockTickr: When did you start your blog and what prompted you to do so?

TraderAM: I started my blog at start of 2008. A lot of my trading ideas and best info has come from free blogs and forums despite the many books and courses I have been on. So in a similar fashion, I wanted to pass this on to any new traders who happen to want to read my rantings. Another reason was the hope that more experienced traders would read it and pass on their valuable insights which would help and improve my own trading. I like to think I have achieved both of those objectives.

StockTickr: Thanks for your time, TraderAM.

TraderAM: Thanks, Dave.

There is now a risk free trial for StockTickr Pro – hone your trading edge and become consistently profitable with StockTickr.

Stay tuned – there are several interviews on the way. You can subscribe to these interviews via RSS feed.

Previous interviews in the StockTickr Interview Series (RSS feed)

Do you have suggestions for other traders you’d like to see an interview with? Let us know!

Introducing Automation into your Manual Trading System

Dave — Fri, 30 Jan 2009 13:22:08 +0000

When a lot of traders think of automated trading, they envision going from completely manual trading to completely automated trading. They mistakenly view this as a loss of control – they are used to being in complete control of their trading making every decision. It’s unsettling for a lot of people to lose this control and offload more work to their computer.

What most don’t realize is that automated trading IS complete control. The factors and inputs are completely designed and controlled by the trader and the computer doesn’t stray from the strategy it’s been assigned. This is just the opposite of lack of control.

A good way to think about switching to automated trading is to introduce automation into your manual trading system. Think of it as a continuum like in the image above. It’s not all or nothing – you can slowly integrate automation into your manual trading system so that over time you’ll do less trading grunt work and become more and more comfortable with automated trading as you move to the right on the continuum.

Here are some ways to start offloading manual work from your trading system:

Use a product like Trade-Ideas to systematically gather stocks that fit your trading system.
Explore using multiple monitors to save you time and effort and miss fewer trades.
Use tools to automatically calculate your position size, saving time and preventing mistakes.
Streamline your trading routine to cut the fat and become a more efficient trader.
Use the StockTickr Trading Bot to get you into trades and then you can manually manage all aspects of the exit.
Use the StockTickr Trading Bot to get you into trades with a time stop and then optionally manage an exit before the time stop expires.

There are lots of ways to become familiar with automation without going all in. Are there other ways you can think of to move towards automation on the continuum?

Should You Trade with Multiple Monitors? Here’s How To Tell

Dave — Tue, 06 Jan 2009 13:15:48 +0000

OK, I don’t think anyone on the planet needs a 24 monitor setup like the one above, but it makes a lot of sense to trade with more than one monitor. I trade with the 4 monitor setup pictured below and I would never go back. It’s not cheap, but it was a simple decision to me once I thought about it. (See the end of the post for links to the specific components I bought).

First off, there are a lot of benefits to having multiple monitors. Some are pretty obvious but others I didn’t realize until I used my setup for a while.

1. Much more viewable area to have more windows open

Flipping through open windows is extremely time consuming and inefficient. You don’t realize just how much time you spend flipping through windows until you don’t have to. Let’s say you look at charts in multiple timeframes – the daily, hourly, and 5 minute charts. If there’s not room on your screen to have all three visible at the same time you’re going to spend a lot of time and energy changing between windows to take in the information on each chart. Since the data is changing constantly, you’ll be doing this routine several times just in the course of a few minutes. If you have enough desktop space to have all the charts visible on your screen at once you’ll be at a huge advantage.

2. You’ll miss fewer trades

If you’re not spending time flipping windows, you’ll have more time and more desktop area to find more setups, so you’ll miss fewer trades. Of course, if you have a tendency to over trade you’ll need to be very careful and keep that in check.

3. You’ll be far more productive doing your non-trading tasks

I really underestimated the affect multiple monitors would have on my non-trading tasks. It’s huge! Imagine doing some programming or intense writing and then having to refer to some documentation in a browser window. With one monitor, there’s really just not enough room to position both windows quickly and efficiently on one screen. With multiple monitors there’s plenty of room to place the windows side by side so they’re both visible. I can’t emphasize enough how much more efficient this is.

Making a “Business Case” to Your Wallet (or Spouse!)

Multiple monitors are not cheap. A reliable, supported video card that supports 4 monitors is at least $500, plus at least $180 or so per monitor and you’re closing in on $1400-$1500, which is more than even the computer itself in many cases. Plus you’ll need a mounting setup.

Does it make sense for you to spend that much for a multi-monitor setup for trading? It depends on your trading and how well you know your trading system and daily routine.

The questions I asked myself were:

Do I believe that I’d be able to find enough additional trades using the new monitors to recoup the cost?
Do you find yourself missing out on setups that have made your watchlist but you miss them because they’re hidden behind another window or minimized?
How regularly do you miss trades like this?
How many of these trades would it take to recover the cost of the monitors?

As you can see, the answers to some of these questions depend a lot on the frequency that you’re trading, the level of profit you make from your trades, how much size you use on your trades, and the nature of your trading system.

For me, it was a pretty easy decision. I knew my system well enough to realize that I was missing trades on a somewhat regular basis and it would just take a couple of good winning trades to cover the cost. Looking back on my results I figured the investment would easily pay for itself within a month. While at first the upgrade seemed a little decadent considering my normally cheap, bare-bones personality, when I thought about it in these terms I realized that there was really no argument at all and I pulled the trigger.

I bought these several months ago, but here are some equivalent components that I would get if I was making the purchase today – note that, of course, by the time you’re reading this these prices have probably changed:

4 X BenQ FP202W V3 20-inch Widescreen LCD Monitor (Black)
@ $173.50
Matrox M9140 – Graphics adapter – M9140 – PCI Express x16 low profile – 512 MB DDR2 – DVI
@ $511.99
DS100 Quad-monitor Desk Stand
@ $291.93

Any suggestions on the setup? Would you make any changes?