Sever Your Market Tether on Vacation

When I first started trading it was very hard to go on vacation and spend time away while the markets were open. I would reflexively check what stocks were gapping and try to imagine how my trading day would be going if I were trading. Honestly I just couldn’t enjoy vacation – I constantly felt like I was missing out on profitable market action but more importantly I worried I was losing time to improve as a trader. What most traders don’t realize is that purposeful time away from the markets is one of the most valuable long term investments you can make for your trading. This post explains how to use vacation to improve your trading.

Realization that Vacation is Long Term Profitable

As a new trader years ago I would dread time off. Sometime over the course of the last 15 years of trading, though, I’ve become way more comfortable spending time away from the market. Rather than being something to dread, I came to relish days off. I can’t pinpoint a particular moment in time when my thought process changed – it was a gradual change that occurred over time although I do remember a specific incident that accelerated it…

My Worst Day was a Day I Shouldn’t Have Even Been Trading

Many years ago my wife and I had planned to travel across the country to spend time with friends for the weekend. We had purchased plane tickets, hotel, and the rental car. We had been travelling a good amount prior to this trip so as the travel day approached we were not exactly looking forward to getting on another plane.

The day came and on our way to the airport very early that Friday morning, we both looked at each other and realized we really didn’t want to go on the trip. We just couldn’t get back on a plane and fly all the way across the country. We decided to turn the car around and go home – one of those crazy decisions that we never make. “Ah!”, I thought as we drove home, “I’ll be able to trade today.” Was having to skip a trading day one of the reasons we turned around that morning? Not consciously but looking back subconsciously it had to have been.

I traded that day as I normally would having skipped a vacation that we’d already paid for. You can guess what happened – that ended up being my worst trading day up until that point. I didn’t make any big mistakes – it was just dumb luck that this happened to be the day that my strategies performed REALLY, REALLY BADLY. I’ve never forgotten that day – a very costly one at least partly due to the fact that I was uncomfortable being away from the market.

I’ve recently thought a lot about my increasing comfort with time away from the trading desk and after seeing the results of this poll from Brian Shannon from Alphatrends where most traders said they wanted the markets opened more I realized that most traders aren’t getting the most out of their time way from the market.

hey traders, what are your thoughts on three-day weekends?

— Brian Shannon, CMT (@alphatrends) January 19, 2020

Eliminate the Distracting “Market Tether”

As traders we feel the need to be “in tune” with the market. When we go on vacation there’s an underlying fear that we’ll lose that synchronicity – we’ll become out of touch with the market and when we return to trading it will take time to burrow back into the market’s current flow.

What I’ve come to realize is that this market tether is exactly what you need to cut on vacation to become a better trader over time. Doing this right will allow you to truly enjoy your time away from the markets AND improve your trading each time. Here’s how.

The Market Tether: Short Term Satisfaction but Long Term Closed Mindedness

The vacation “market tether” is bad for traders for a couple of obvious reasons and a very important one that’s not apparent:

• You aren’t immersed fully in enjoying vacation
• You aren’t really getting recharged from your time away from trading
• Most importantly: fully severing the market tether gives you a better long term trading perspective

The first two are obvious – if you’re distracted for any reason you’re not able to fully enjoy your current vacation activity. You’re simply not getting the most out of vacation. Not only does this make the vacation less enjoyable than it should be, but you’ll ultimately be missing out on one of the most important long term benefits of time away.

This “market tether” can be conscious or subconscious. Either way it’s satisfying a short term need at the expense of long term trading improvement. The short term need is the desire to stay in tune with the market. Less experienced traders might even be missing the thrill of market action like the feeling of a gambler who steps away from the slot machines.

When you’re trading each day you should be following your trading systems closely. By definition you are burrowed down into your trading zone – ignoring all other distractions. This includes even other clues for other ideas that could turn into profitable trading strategies. Regularly letting yourself to come completely out of your “trading zone” – that is, severing your market tether however psychologically difficult – will ultimately allow you have a fresh perspective on the market itself and your own trading. What I’ve found over the years is that this fresh perspective isn’t possible if you’re continuously burrowed into the trading zone you’ve created for yourself day in and day out. You need to get completely out of your trading zone to be able to expand it and improve it.

Without occasionally severing your market tether you’ll always be the trader that trades the myopic zone that you’ve created for yourself. Many of my best trading ideas have come right after time away from the markets.

Take Vacation with Intention

When you have this perspective it’s much, much easier to spend time away from your trading desk. In fact, you should look forward to it and plan ahead to ensure that you’re getting ENOUGH time away from the markets to get better.

When planning vacation I always check my earnings season tool to choose times that are likely not to see significant market action. I know how my strategies are affected by earnings so I can plan to spend time away when my strategies are likely to not trade frequently anyway. Because I day trade exclusively, I also have the flexibility to take an unplanned vacation day on a whim since I have no overnight positions that I’m obligated to manage – one of the most underrated reasons to day trade.

When you’re on vacation, it’s much easier to enjoy when you realize that you’re literally becoming a better trader by not trading. Ignore the markets while you’re away and you’ll be refreshed and in a position to see the markets in a different light when you come back.

Do you have strategies for taking market vacations? I’d like to hear about them in the comments.