I live in Los Angeles and for the past 3 months have been trading the London Session. It’s been really tough on me as of late though. I’m going to try trading the NY session from now on. It will allow me to wake up early instead of going to bed ridiculously late. Do you think its possible to still do well in FX if I miss the first 5 hours of London? I’d be starting at 5am my time, right at the NY open.
This is a great question as many traders try to figure out how they can weave in trading into their life so they can have a healthy work/life balance.
Let’s take a look at what Bruce Kovner said in Market Wizards and I will add in my own perspective:
Question: You obviously can’t trade round the clock. How do you structure your time to balance your work versus your personal life?
Kovner: I generally try to keep my trading confined between 8 AM and 6 or 7 PM. The Far East is very important, and if the currency markets are very active, I will trade the Far East, which opens at 8 PM. The AM session in Tokyo trades until 12 PM. If the markets are in a period of tremendous movement, I will go to bed for a couple of hours and get up to catch the next market opening. It is tremendously interesting and exciting.
Obviously bear in mind that Kovner was managing a hedge fund during that time, so it was his full time profession and thus put in a lot of time into it.
I would say that the traders living in London have probably the most ideal trading hours. They can get up around 6-8 AM their time, and they can work until 5pm London time, which would be the equivalent of Noon EST. Then they get off from work, and if the markets are still moving, they can potentially weave in some market analysis and trading during the evening London time, while the NY market is open for another 4 hours. Then they go to bed during the lower liquidity Sydney and Asian session and repeat the process. So they have the ideal trading time.
The traders on the east coast have it second best I would say. Many traders on the East Coast can get up from anywhere from 4 AM – 7 AM, and trade until Noon or 4pm. Then they can go to sleep at 8-10 PM EST and repeat the process.
Now for people on the West Coast, it can be a bit more difficult because trading the London session means they have to get up at 1 AM their time, so it can be quite brutal on their personal lives.
What I would say is, you can still succeed in FX if you trade starting from 5 AM your time (8 AM EST). It is just your maximum opportunity set will be smaller. There will be times the intraday volatility occurs in the London session, and by the time you wake up, the easy money is over. Then there will be other times that the intraday volatility occurs during the NY session, and when you wake up you are ready for it. Then there will be other occasions, where there is a swing trading in the form of MDMM or GM movement occurring, where it doesn’t matter whether you wake up at 2 AM or 5 AM your time, because the swing trading opportunity will be so big, that you can still get in to it at various points throughout the day.
Therefore, for the MDMM or GM opportunities, you won’t miss too many of them. Your maximum opportunity set for those types of trades will stay roughly the same. It won’t decrease that much. But if you skip the London session, then the maximum opportunity set for the news trades and intraday inefficiencies and volatility will be cut in half or so. I don’t know the exact number. No one knows the exact number, but the general rule is that it will go down.
That means that you need to be on your game and raise your skill level for those hours that you do watch the market and trade. It means you need to be able to do some of the daily habits in real time. Being able to process the information flow and headlines and put that info into the proper liquidity and macro model in your mind. It means understanding the battle of scenarios going on and processing that information in your head quickly. It means being more organized with your analysis and papers and charts you have in front of you, so you can put the pieces of the puzzle together quickly.
It was really hard for me years ago when I first started my daily habits. But now that I have tweaked the habits and have a more powerful philosophy, I can sometimes just look at a chart and just a few headlines and get a strong feel for what can happen that trading day. Sometimes I don’t need any fancy 1-4 hours analysis of the situation to know what is going on or what is going to happen. Sometimes just doing the daily habits for several days and weeks, you start to remember a lot of things and keep a lot of information in your subconscious and rattling around in your brain and you can call upon it at will. You start to map out game plans in your mind. Initially you may want to write out the game plans on paper. But when you get good, or are pressed for time, you can have the game plans in your mind.
The other option, if you are scared you are lowering your maximum opportunity set too low, is to trade futures and stocks as well, if you have the money for that. That will raise your maximum opportunity set.
And I do not see anything wrong with napping depending on the market action. If you can get a good 4-7 hours of sleep in at one point for your main sleep session, then nap for 30 min to 1-2 hours later on in the day, depending on market action and what positions you have on, I don’t see anything wrong with that. Of course it depends on your job, etc. A lot of top traders, especially fx and futures traders do napping. Since the FX and futures markets are 24 hours, there will invariably be days during the year where you have to nap.
In some ways the pure individual stock traders have it easier time wise since they can mostly trade for a single 7 hour session for the most part.
I realize my words may sound fruitless, but there is no need to despair! As you give things time, raise your skill level to even higher levels, realize you are learning and mastering trading foundations and principles that will give you an edge for life, and figure out how you want your life to be, you will figure it all out.
Also remember, as Bruce Kovner said in Market Wizards:
It doesn’t feel like work, except when you lose – then it feels like work.
I am sure there are plenty of great traders that have made it work from the West Coast. I believe Michael Marcus trades from his home in Malibu.
There was just one thing I forgot to include.
That is the principle that it doesn’t have to be all or nothing.
For example, you can trade the NY session, and the move doesn’t have to be just started, or the move doesn’t have to be fully over. Sometimes the potential trade opportunity is partially underway, but you can still jump into the trade, but the potential win rate is lower, and potential reward risk is lower, but you can still find the trade worthwhile to place, but since part of the opportunity is over, you compensate for that by using a lower risk per trade than you normally would engage in.
For example, if you were spotting the opportunity in the European session for a 150 pip move, you may have risked 1% on it, but if you started looking at the market during the NY session, and the market has moved 70 pips already and the move is half over, it can still be worth placing the trade, just not with 1% risk, but maybe with some lower amount, such as 0.25% or 0.50% risk.
Therefore, you can add in the principle of variable position sizing. Which is that: The higher the potential win rate, reward risk ratio, faster the trade moves in your favor, etc, the more you would risk. But the lower the potential win rate, reward risk ratio, trade being more susceptible to retracements against you, etc, then the lower you would risk.