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Mar 29, 2021, 2:47 PM GMT

How to Decide How Much Time to Spend Trading

Big Ben, London, UK. Thinking about the importance of time in trading

The question of how much time is 'enough' for successful trading is one that deals with limitations. Chiefly, with matters of when it is best to be active on the market and how to fit one's daily schedule so that there is enough time left for activities that are not related to trading.

With relation to the type of assets that are traded

Most financial instruments, such as currency pairs, stocks, commodities, indices and others, are commonly traded as derivatives. It is important to note that these derivatives markets have varying opening hours, which determines the peaks and valleys in daily trading activity. The most popular and heavily traded market is the FOREX, which is open from Monday till Friday, and it runs almost 24 hours a day, with slight circumstantial exceptions and variations.

The conundrum for the individual trader here stems from the market's sheer size and its lengthy workdays since it runs for close to 120 hours a week. Naturally, nobody can be glued to the screen for such extended stretches of time, which is why traders need to pick only the most opportune moments to be active. Typically, those include periods during the day when the underlying trading volume climaxes. This makes the market behave more logically as the adverse volatility brought about by low liquidity diminishes.

Ideally, the trader needs to be active whenever there is most conviction in the market. This happens at times when the disparity between buying and selling pressures becomes the most pronounced, which is typically reflected on the underlying price action by virtue of least adverse fluctuations.

Arguably, the best time during the day to look for such discrepancies in trading volume is between 2.30 pm and 4.30 pm CET, which is when the British, European, and U.S. trading sessions overlap.

Thinking about time

Time should be perceived as yet another asset/ tool under the trader's disposal. Just like any other input by the trader, the actual value of time stems from the way he manages it.

Some people receive satisfaction from extra leisure during their day while others enjoy spending more time analysing the market. The key to achieving consistency in the long-term lies in the trader's ability in striking a balance between carrying out his daily tasks and finding sufficient time for actual trading. If he were to neglect one of those favouring the other, he would eventually become strained from mounting psychological pressure and exhaustion.

In other words, trading should not take all of the trader’s time, even if he is enjoying considerable success right from the start. Managing the trader's time is just as important as planning the amount of capital he will require for his account. He needs to decide what would be the best solution for him personally while not forgetting to take a break every once in a while.

Spending much time on the market does help beginner traders hone their skills, but ultimately time is not paramount for success independently from other inputs such as capital and knowledge. It is vitally important to relax and take some time off from trading to keep healthy, level-headedness and stay relaxed. Excessive trading can result in intensifying fatigue, which can be detrimental to the trader's overall performance in the long-term.